Question
A company has three product lines and has historically utilized the traditional costing system to allocate overhead costs to each product line. Due to significant
A company has three product lines and has historically utilized the traditional costing system to allocate overhead costs to each product line. Due to significant differences in the production processes for the three product lines, the company implemented an activity-based costing study and identified the activity-based cost for each product as shown below:
| Product A | Product B | Product C |
Traditional cost per unit | $558 | $1,375 | $1,211 |
Activity based cost per unit | $485 | $1,585 | $987 |
Selling price per unit | $650 | $1,450 | $1,300 |
Which statement is true regarding the selling price of each of the three products?
A. The selling price for Product B should increase
B. No change should be made to the selling price
C. The selling price for products A and C should increase
D. The selling price should increase for all three products
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