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 $ 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 specific customers.

Required:

1. The company's manufacturing overhead costs for the year are expected to be $450,000. 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:

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

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