(Determining product cost) Belton Furniture Corporation has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for 2000 are as follows.

a. Determine unit product cost using the appropriate cost drivers for each of the products.

b. Before it installed an ABC system, the company used a conventional costing system and allocated factory overhead to products using direct labor hours. The firm operates in a competitive market and product prices were set at cost plus a 20 percent markup.
1. Calculate unit costs based on conventional costing.
2. Determine selling prices based on unit costs for conventional costing and for ABC costs.

c. Discuss the problems related to setting prices based on conventional costing and explain how ABC improves the information.

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Activity Centers Costs Utilities $300,000 Scheduling and setup 273,000 Material handling 640,000 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