Chester Inc. has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for 2013 follow.

The company€™s products and other operating statistics follow.

a. Determine unit product cost using the appropriate cost drivers for each product.
b. Before it installed an ABC system, Chester used a traditional costing system that allocated factory overhead to products using direct labor hours. The firm operates in a competitive market and sets product prices at cost plus a 25 percent markup.
1. Calculate unit costs based on traditional costing. (Round to the nearest cent.)
2. Determine selling prices based on unit costs for traditional costing and for ABC. (Round to the nearest cent.)
c. Discuss the problems related to setting prices based on traditional costing and explain how ABC improves theinformation.

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Costs Activity Centers Utilities Scheduling and setup Activity Drivers 90,000 machine hours 2,400,000 pounds of material $1,800,00 1,170 setups 1,638,000 3,840,000 Material handling PRODUCTS Direct costs Machine hours 120,000 $120,000 135,000 30,000 405 450,000 1,200,000 90,000 75,000 45,000 195 750,000 15,000 570 Number of setups Pounds of material Number of units produced60,000 Direct labor hours 30,000 27,000 48,000