10.

value: 5.78 points

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	$	13.60	$	22.10
Direct labor cost per unit	$	6.40	$	2.70
Direct labor-hours per unit		0.44		0.27
Number of units produced		13,000		77,000

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 $630,938. 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 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:

	Mercon	Wurcon	Total
Engineering design time (in hours)	3,100	2,200	5,300

Compute the unit product costs for the two products using the proposed ABC system. (Round your final answers to 2 decimal places.)

	Mercon	Wurcon
Unit product cost	$	$