Reference no: EM132533896
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 Wurcon
Direct materials cost per unit $8.00 $5.00
Direct labor cost per unit $7.00 $9.00
Direct labor-hours per unit 0.20 1.80
Number of units produced 10,000 20,000
- These products are customized to some degree for specific customers.
Required:
Question 1. The company's manufacturing overhead costs for the year are expected to be $1,140,000. Using the company's conventional costing system, compute the unit product costs for the two products.
Question 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) 5,000 5,000 10,000
Compute the unit product costs for the two products using the proposed ABC system.
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