Answer:
Results are below.
Explanation:
<u>First, we need to calculate the predetermined overhead rate:</u>
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Total number of direct labor hours= (1,000*2) + (2,000*7)= 16,000
Predetermined manufacturing overhead rate= 1,200,000 / 16,000
Predetermined manufacturing overhead rate= $75 per direct labor hour
<u>Now, we allocate overhead to each unit and calculate the unitary cost:</u>
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Mercon:
Allocated MOH= 75*2= $150
Unitary cost= 150 + 8 + 10= $168
Wurcon:
Allocated MOH= 75*7= $525
Unitary cost= 525 + 6 + 11= $542
<u>Finally, using activity-based costing:</u>
Mercon Wurcon Total
Engineering design time (in hours) 1,000 1,000 2,000
Direct labor-hours 2,000 14,000 16,000
Engineering= 600,000 / 2,000= $300 per design hour
Direct labor= 600,000 / 16,000= $37.5 per direct labor hour
Mercon:
Allocated MOH= 37.5*2 + 300*1= $375
Unitary cost= 375 + 8 + 10= $393
Wurcon:
Allocated MOH= 37.5*7 + 300*0.5= $412.5
Unitary cost= 412.5 + 6 + 11= $429.5
