Determining product cost) Grand Forks Corp. has identified activity centers to which overhead costs are assigned. The cost pool amounts for these cen¬ ters and their selected activity drivers for 2006 are as follows.

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 cost¬ ing 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 20 percent markup.
1. Calculate unit costs based on traditional costing.
2. Determine selling prices based on unit costs for traditional costing and for ABC costs.

c. Discuss the problems related to setting prices based on traditional cost¬ ing and explain how ABC improves the information.

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Activity Centers Utilities Scheduling and setup Material handling Costs $1,200,000 1,092,000 2,560,000 Activity Drivers 60,000 machine hours 780 setups 1,600,000 pounds of material The company's products and other operating statistics follow: PRODUCTS A B C Direct costs $80,000 $80,000 $90,000 Machine hours 30,000 10,000 20,000 Number of setups 130 380 270 Pounds of material 500,000 300,000 800,000 Number of units produced. 40,000 20,000 60,000 Direct labor hours 32,000 18,000 50,000