Kunkel Company makes two products and uses a conventional costing system in which a single plantwide...

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Accounting

Kunkel Company makes two products and uses a conventionalcosting system in which a single plantwide predetermined overheadrate is computed based on direct labor-hours. Data for the twoproducts for the upcoming year follow:
Mercon Wurcon
Direct materials cost per unit $ 10.00 $ 7.00
Direct labor cost per unit $ 7.00 $ 10.00
Direct labor-hours per unit 1.40 6.80
Number of units produced 1,000 2,000
These products are customized to some degree for specificcustomers.
Required:
1. The company's manufacturing overhead costs for the year areexpected to be $450,000. Using the company's conventional costingsystem, compute the unit product costs for the two products.
2. Management is considering an activity-based costing system inwhich half of the overhead would continue to be allocated on thebasis of direct labor-hours and half would be allocated on thebasis of engineering design time. This time is expected to bedistributed as follows during the upcoming year:
Mercon Wurcon Total
Engineering design time (in hours) 2,000 2,000 4,000
Compute the unit product costs for the two products using theproposed ABC system.

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1 Calculation of unit product cost for the two products under companys conventional costing system Predetermined overhead rate Total manufacturing overhead Total direct labor hours Total manufacturing overhead Given 450000 Direct labor hours for product Mercon Number of units produced x Direct labor hours per unit 1000 units x 140 hr per unit 1400 hours Direct labor hours for product See Answer

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	Mercon		Wurcon
Direct materials cost per unit	$	10.00	$	7.00
Direct labor cost per unit	$	7.00	$	10.00
Direct labor-hours per unit		1.40		6.80
Number of units produced		1,000		2,000

	Mercon		Wurcon		Total
Engineering design time (in hours)		2,000		2,000		4,000