Before it installed an abc system the company used a

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Reference no: EM13597199

Skagway Co. has identified activity centers to which overhead cost are assigned. The cost pool amounts for these centers and their selected activity drivers for 2010 follow.

Activity Center Costs Activity Drivers
Utilities $1,800,000 90,000 machine hours
Scheduling and setup $1,638,000 1,170 setups
Material Handling $3,840,000 2,400,000 pounds of material

The company products and other operating statistics follow

Products

A B C

Direct Costs $120,000 $120,000 $135,000
Machine Hours 45,000 15,000 30,000
Number of Setup 195 570 405
Pounds of Material 750,000 450,000 1,200,000
Number of Units Produced 60,000 30,000 90,000
Direct Labor House 48,000 27,000 75,000

A. Determine unit product cost using the appropriate cost drivers for each product.

B. Before it installed an ABC system, the company used a traditional costing system that allocated factory overhead to products using direct labor hours. The firm operates in a competitive market and sets products price at cost plus a 25% markup.

1. Calculate unit costs based on traditional costing. (round)

2. Determine selling price based on unit costs for traditional costing and for ABC.

Reference no: EM13597199

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