Kunkel Company makes two products and uses a conventional costing system in whic

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 $336,000. 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.)

2.

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.(Do not round intermediate calculation. 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

Total direct labor-hours=0.44*18000+0.22*79000 = 25,300
Overhead rate=Overhead costs/Total direct labor hours=$612,500/25,300=$24.2/hr

Unit product cost for A (let A be the 1st product)
=Material cost/unit+Overhead cost/unit
= $12.80/unit + $24.2/hr*0.44 hr/unit
= $12.80/unit + $10.648/unit
= $23.448/unit

Similarly, unit product cost for B (let B be the 2nd product)
=Material cost/unit+Overhead cost/unit
= $22.30/unit + $24.2/hr*0.22 hr/unit
= $22.40/unit + $5.324/unit
= $27.724/unit

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