Comparing an ABC system with a traditional cost system Use the information in Exercise 6-6A to complete

Question:

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

Required

a. Compute the amount of overhead cost allocated to each type of decoder 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 high-volume product when using ABC.

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