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Kunkel company makes two products

19/12/2020 Client: saad24vbs Deadline: 14 Days

Problem 3-12A Contrasting ABC and Conventional Product Costs [LO2, LO3, LO4]


Precision Manufacturing Inc. (PMI) makes two types of industrial component parts—the EX300 and the TX500. It annually produces 60,000 units of EX300 and 12,500 units of TX500. The company’s conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below:






EX300


TX500


Total


  Direct materials


$


366,325


$


162,550


$


528,875


  Direct labor


$


120,000


$


42,500


$


162,500




The company is considering implementing an activity-based costing system that distributes all of itsmanufacturing overhead to four activities as shown below:




Activity Cost Pool (and Activity Measure)


Manufacturing Overhead


Activity


EX300


TX500


Total


  Machining (machine-hours)


$


198,250




90,000




62,500




152,500


  Setups (setup hours)




150,000




75




300




375


  Product-level (number of products)




100,250




1




1




2


  General factory (direct labor dollars)




60,125


$


120,000


$


42,500


$


162,500
















  Total manufacturing overhead cost


$


508,625






























Required:


1-a.


Compute the plantwide overhead rate that would be used in the company’s conventional cost system. (Round your answer to 2 decimal places.)




  Predetermined overhead rate


$


per DL$




1-b.


Using the plantwide rate, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)






EX300


TX500


  Unit product cost


$


$


2-a.


Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)




 Activity Cost Pools


            Activity Rate


  Machining


$


   per MH


  Setups


$


   per setup hr.


  Product-level


$


   per product


  General factory


$


   per DL$




2-b.


Using the activity rates, compute the unit product cost for each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.)






    EX300


    TX500


  Unit product cost


$


$


Exercise 3-7 Contrast ABC and Conventional Product Costs [LO2, LO3, LO4]


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


$


10.00


$


8.00


  Direct labor cost per unit


$


3.00


$


3.75


  Direct labor-hours per unit




0.20




0.25


  Number of units produced




10,000




40,000




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 $336,000. Using the company's conventional costing system, compute the unit product costs for the two products. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)




Mercon


Wurcon


  Unit product cost


$


$




2.


Management is considering an activity-based costing system in which half of the overhead wouldcontinue 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)


4,000


4,000


8,000




Compute the unit product costs for the two products using the proposed ABC system. (Do not round intermediate calculation. Round your final answers to 2 decimal places.)




Mercon


Wurcon


  Unit product cost


$


$


Exercise 3-3 Compute ABC Product Costs [LO3]


Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates:




  Activity Cost Pool


        Activity Rates


  Labor-related


$


7.00


 per direct labor-hour


  Machine-related


$


3.00


 per machine-hour


  Machine setups


$


40.00


 per setup


  Production orders


$


160.00


 per order


  Shipments


$


120.00


 per shipment


  General factory


$


4.00


 per direct labor-hour




Cost and activity data have been supplied for the following products:






J78


B52


  Direct materials cost per unit


$


6.50


$


31.00


  Direct labor cost per unit


$


3.75


$


6.00


  Number of units produced per year




4,000




100




Total ExpectedActivity






 J78




 B52


  Direct labor-hours


1,000




40


  Machine-hours


3,200




30


  Machine setups


5




1


  Production orders


5




1


  Shipments


10




1


Required:


Compute the unit product cost of each product listed above. (Round your answers to 2 decimal places.)






J78


B52


  Unit product cost


$


$


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