ABC versus Traditional Product Costing Willett Company makes two types of products: Product A and Product B. The company’s management accountants accumulated the following production cost information for 2009:

Required:Assume Product A sells for $140 each and Product B sells for $160 each. If all products are sold, what is the gross margin of each product assuming the following:

1. All manufacturing overhead costs are allocated on the basis of direct labor hours.

2. Costs of manufacturing utilities are assigned on the basis of direct labor hours; costs of quality inspections are assigned on the basis of production batches; costs of engineering are assigned on the basis of engineering changes made; and costs of factory supervision salaries can’t be directly assigned to either product.

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Production and sales volume (units) Direct labor cost per hour Direct materials cost per unit Manufacturing overhead costs: Total cost of manufacturing utilities Total cost of quality inspections Total cost of engineering... Total cost of factory supervision salaries Total manufacturing overhead costs Activities cost drivers: Direct labor hours per unit Number of production batches per product line Number of engineering changes per product line Product A Product B Total 1,000 500 $6 $12 $5 $7 $ 20,000 80,000 48,000 52,000 $200,000 22 3 24 2 4,000 18 40 8 12