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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.

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$13.00$11.00

Direct labor cost per unit$14.00$15.00

Direct labor hours per unit0.907.05

Number of units produced2,0004,000

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 $900,000. 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:

MerconWurconTotal

Engineering design time (in hours) $4,000$4,0008,000

Compute the unit product costs for the two products using the proposed ABC system.

(For all requirements, do not round intermediate calculations. Round your final answers to 2 decimal places.)

1.What is the unit product cost under conventional system for Mercon and Wurcon?

2.What is the unit product cost under ABC system for Mercon and Wurcon?

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