Kunkel Company makes two products and uses a conventional costing system in which a single plantwide predetermined
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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 laborhours. Data for the two products for the upcoming year follow:
Mercon Wurcon
Direct materials cost per unit $ $
Direct labor cost per unit $ $
Direct laborhours per unit
Number of units produced
These products are customized to some degree for specific customers.
Required:
The company's manufacturing overhead costs for the year are expected to be $ Using the company's conventional costing system, compute the unit product costs for the two products.
Management is considering an activitybased costing system in which half of the overhead would continue to be allocated on the basis of direct laborhours 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
Compute the unit product costs for the two products using the proposed ABC system.
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