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 $ 9.00 $ 7.00 direct labor cost per unit $ 6.00 $ 7.00 direct labor-hours per unit 0.20 2.40 number of units produced 4,000 8,000 these products are customized to some degree for specific customers.

using conventional costing system:

total production costs using conventional costing system:

Explanation:

                                                    Mercon           Wurcon

Direct materials cost per unit       $9.00             $7.00

Direct labor cost per unit             $6.00              $7.00

Direct labor-hours per unit            0.20                2.40

overhead rate applied                 $6.40            $76.80      

Number of units produced          4,000              8,000

overhead rate = total overhead / total direct labor hours = $640,000 / [(4,000 x 0.20) + (8,000 x 2.40)] = $640,000 / 20,000 = $32 per direct labor hour

unit cost mercon = $9 + $6 + $6.40 = $21.40

unit cost wurcon = $7 + $7 + $76.80 = $90.80

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