Kunkel Company makes two products and uses a conventional costing system in whic
ID: 2373602 • Letter: K
Question
Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:
The company's manufacturing overhead costs for the year are expected to be $814,335. Using the company's conventional costing system, compute the unit product costs for the two products. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)
Management is considering an activity-based costing system in which half of the overhead would continue to be allocated on the basis of direct labor-hours and half would be allocated on the basis of engineering design time. This time is expected to be distributed as follows during the upcoming year:
Compute the unit product costs for the two products using the proposed ABC system. (Round your final answers to 2 decimal places.)
Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:
Explanation / Answer
1. Total Mfg OH = $814,335
Totsl DL Hrs used = 0.45*29000 + 0.3*73000 =34950 DL Hrs
So Mfg OH rate based on DL Hrs
= 814335/34950=$23.30per DL Hr
SO Mfg OH for Meron = 0.45*$23.30 = $10.49
For Wurcon = 0.30*23.30 = $6.99
SO Unit cost of Mercon = 13.60+5.30+10.49 = $29.39
For wurcon = 21.90+3.80+6.99 = $32.69
2. Half of Mfg OH = 814335/2 = $407,167.50
Totsl DL Hrs used = 0.45*29000 + 0.3*73000 =34950 DL Hrs
So Mfg OH rate based on DL Hrs
= $407,167.50/34950 = $11.65 per DL Hr
SO Mfg OH for Meron = 0.45*$11.65 = $5.24
For Wurcon = 0.30*$11.65 = $6.99 = $3.50
Total Engg Design = 5800
Mfg OH for Engg design = $407,167.50
SO ENg gdesign rate = $407,167.50/5800 = $70.20
SO Mercon used 2800*$70.20 = $196,560.00
So Pu cost = 196560.00/29000 = $6.78
& Wurcon used 3000*$70.20 = $210,600.00
So PU cost = $210,600.00/73000 = $2.88
SO Unit cost of Mercon = 13.60+5.30+5.24+6.78 =$30.92
For wurcon = 21.90+3.80+3.50+2.88 =$32.08
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