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: Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced Mercon $ 8.00 $ 13.00 0.40 4,000 Wurcon $ 6.00 $ 16.00 2.80 8,000 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 $720,000. Using the company's conventional costing system, compute the unit product costs for the two products. 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: Engineering design time (in hours) Mercon 2,000 Wurcon 2,000 Total 4,000 Compute the unit product costs for the two products using the proposed ABC system. (For all requirements, do not round intermediate calculations. Round your final answers to 2 decimal places.) Mercon Wurcon 1. Unit product cost under conventional system 2. Unit product cost under ABC system

Answer 1

Answer Pagano 0 unit product coreof cendere conventional conting system Menicon direct labor hours for Mercon 0.4 x 4000 = 1600 direct labor hours for wwicon=2180 X 8000 22400 24000 Total direct labor hours = (600 + 22400 = Expected manubachwering overhead conf = $ 400,000 enit product coof for Mercon $8+$13 + 0.4 + [ours *240g 720000 = 8 + 13 + 12 $33 Norcon unit procluch cost for Weron = +6 +816 +3.80 80 X 72000 24000 ] 6 + 16 + 84 in ulu $ 106 unit product cork under ABC system Total dired labor hours 24000 Expected manufacturing overhead conf = 720,000 #360000

NO (2 Predetermined overhead rate = $360,000 Page No 24000 $ 15 per direct labor how Total engineering design time in hours = 4000 Predetermine overhead rate $360,000 4000 +90 per engineering design hour Mercon Per unit manufacturing overhead corf (1600x15) + (2000x9) 4000 - 느 $51 - unit product cook for Mercon $8 + $13+$51 $ 72 Nurcon (22400 XIS)+(2000x90 Per urit manubartwring overhead copt = 8000 $64.5 unit product caref for Wurcon = $6+$16+ $64.5 $86.5