Kunkel Company makes two products and uses a conventional costing system in whic
ID: 2378985 • 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 $624,750. 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:
These products are customized to some degree for specific customers.
Required: 1.
The company's manufacturing overhead costs for the year are expected to be $624,750. 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.)
Mercon Wurcon Unit product cost $ $
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:
Mercon Wurcon Total Engineering design time (in hours) 3,300 3,900 7,200
Compute the unit product costs for the two products using the proposed ABC system. (Round your final answers to 2 decimal places.)
Mercon Wurcon Unit product cost $ $
Explanation / Answer
1. DL hrs for the year: Number of units*Direct labor-hours per unit = (18,000 x .5) + (75,000 x .23) = 26250
DL hrs for Mercon = 18,000 x .5 = 9000
DL hrs for Wurcon = (75,000 x .23) = 17250
manufacturing overhead costs = $624,750
manufacturing overhead costs for Mercon per unit = (624,750*9000/26250)/18000 =$11.90
manufacturing overhead costs for Wurcon per unit = (624750*17250/26250)/75000 =$5.474
unit product costs for Mercon: 13.40 + 5.2 + 11.90=$30.50
unit product costs for Wurcon: 23.00 + 3.40 +5.474 =$31.87
2.Allocation of half of manufacturing overhead costs based on number of direct hrs
manufacturing overhead costs = $312375
manufacturing overhead costs for Mercon per unit = (312375*9000/26250)/18000 =$5.95
manufacturing overhead costs for Wurcon per unit = (312375*17250/26250)/75000 =$2.737
Allocation of half of manufacturing overhead costs based on Engineering design time
manufacturing overhead costs = 312375
Total Engineering design time = 7200
manufacturing overhead costs for Mercon per unit = (312375*3300/7200)/18000 =$7.95
manufacturing overhead costs for Wurcon per unit = (312375*3900/7200)/75000 =$2.26
unit product costs for Mercon: 13.40 + 5.2 + 5.95+ 7.95=$39.50
unit product costs for Wurcon: 23.00 + 3.40 +2.737 + 2.26 =$31.39
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.