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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: Mercon $10.00 $4.00 0.20 5,000 Wurcon $ 8.00 $5.00 3.90 10,000 Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced 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 $1,200,000. 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 distributec as follows during the upcoming year: 1. Unit product cost under conventional system 2. Unit product cost under ABC system Mercon 4,000 Wurcon 4,000 Engineering design time (in hours) 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.) Mercan Total 8,000 Wurcon

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: Mercon $10.00 $4.00 0.20 5,000 Wurcon $ 8.00 $5.00 3.90 10,000 Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced 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 $1,200,000. 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 distributec as follows during the upcoming year: 1. Unit product cost under conventional system 2. Unit product cost under ABC system Mercon 4,000 Wurcon 4,000 Engineering design time (in hours) 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.) Mercan Total 8,000 Wurcon

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 30P: Primera Company produces two products and uses a predetermined overhead rate to apply overhead....
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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: Mercon $10.00 $4.00 0.20 5,000 Wurcon Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced These products are customized to some degree for specific customers. 1. Unit product cost under conventional system 2. Unit product cost under ABC system $8.00 $ 5.00 3.90 10,000 Required: 1. The company's manufacturing overhead costs for the year are expected to be $1,200,000. 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: Mercon 4,000 Wurcon 4,000 Engineering design time (in hours) 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.) Mercen Total 8,000 Wurcon
Transcribed Image Text: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: Mercon $10.00 $4.00 0.20 5,000 Wurcon Direct materials cost per unit Direct labor cost per unit Direct labor-hours per unit Number of units produced These products are customized to some degree for specific customers. 1. Unit product cost under conventional system 2. Unit product cost under ABC system $8.00 $ 5.00 3.90 10,000 Required: 1. The company's manufacturing overhead costs for the year are expected to be $1,200,000. 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: Mercon 4,000 Wurcon 4,000 Engineering design time (in hours) 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.) Mercen Total 8,000 Wurcon
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