A manufacturing company adopts ABC for cost allocation: Setup activities $100,000 (500 setups), Machine processing $200,000 (10,000 machine hours), Quality control $50,000 (1,000 inspections).

• Requirements:
  • Calculate the activity rate for each cost pool using ABC.
  • Allocate costs to different products based on activity usage.
  • Prepare a product costing report using ABC principles.
  • Recommend cost reduction strategies based on ABC insights.
  • Discuss how ABC enhances accuracy in product costing and profitability analysis.