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: (M)ercon (W)urcon Direct materials cost per unit (M)$10.00 (W)$8.00 Direct labor cost per unit (M)$ 3.00 (W)$ 3.75 Direct labor-hours per unit (M)0.20 (W)0.25 Number of units produced (M)10,000 (W)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.

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:

(M)ercon (W)urcon Total Engineering design time (in hours) (M)4,000 (W)4,000 TOTAL: 8,000

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