Comparing an ABC system with a traditional cost system Use the information in Exercise 5-6B to complete the following requirements. Assume that before shifting to activity-based costing, Chase Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two surge protectors follow.

Required
a. Compute the amount of overhead cost allocated to each type of surge protector when using direct labor hours as the allocation base.
b. Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC.
c. Explain why the per unit overhead cost is lower for the higher-volume product when usingABC.

Transcribed Image Text:

Direct Labor Hours 16,000 VC620 PH630 9,000 25,000 Total