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.