ABC; pricing

Chester Inc. has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for the year follow.

Activity Centers Costs Activity Drivers

Utilities $$4,680,00090,000$ machine hours

Scheduling and setup $4,258,8001,170$ setups

Material handling $9,984,0002,400,000$ pounds of material

The company$$s products and other operating statistics follow.

Product A Product B Product C

Direct costs $$312,000$ $$312,000$ $$351,000$

Machine hours $45,00015,00030,000$

Number of setups $195570405$

Pounds of material $750,000450,0001,200,000$

Number of units produced $60,00030,00090,000$

Direct labor hours $48,00027,00075,000$

a$.$ Calculate the unit cost for each product using the appropriate cost drivers for each product.

Note: Round your final answers to two decimal places $($i$.$e$.$ round $$4\mathrm{.}355$ to $$4\mathrm{.}36).$

Product A Product B Product C

Unit cost Answer

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Answer

b$.$ Before it installed an ABC system, Chester used a traditional costing system that allocated factory overhead to products using direct labor hours. The firm operates in a competitive market and sets product prices at cost plus a $25$ percent markup. Calculate the unit cost for each product based on traditional costing.

Note: Round your final answers to two decimal places $($i$.$e$.$ round $$4\mathrm{.}355$ to $$4\mathrm{.}36).$

Product A Product B Product C

Unit cost Answer

Answer

Answer

c$.$ Determine selling prices based on unit costs for traditional costing, using the rounded rate from part $($b$).$

Note: Round your final answers to two decimal places $($i$.$e$.$ round $$4\mathrm{.}355$ to $$4\mathrm{.}36).$

Traditional costing Product A Product B Product C

Selling price Answer

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Answer

d$.$ Determine selling prices based on unit costs for ABC, using the rounded rates from part $($a$).$

Note: Round your final answers to two decimal places $($i$.$e$.$ round $$4\mathrm{.}355$ to $$4\mathrm{.}36).$

Traditional costing Product A Product B Product C

Selling price Answer

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Answer