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 |
$ |
13.60 |
$ |
21.90 |
| Direct labor cost per unit |
$ |
5.30 |
$ |
3.80 |
| Direct labor-hours per unit |
|
0.45 |
|
0.30 |
| Number of units produced |
|
29,000 |
|
73,000 |
|
| These products are customized to some degree for specific customers. |
| 1. |
The company's manufacturing overhead costs for the year are expected to be $814,335. 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 |
Wurcon |
Total |
| Engineering design time (in hours) |
2,800 |
3,000 |
5,800 |
|
|
Compute the unit product costs for the two products using the proposed ABC system.
|