Analyze, Think, Communicate ATC 5-1 Business Applications Case Using ABC to improve product costing Hydraulic Hoses, Inc., produces specialized industrial hoses for applications such as high-pressure hydraulics and the transference of highly corrosive materials. The company has recently implemented an ABC system for three of its products, and is interested in evaluating its effectiveness before converting to an ABC system for all products. To perform this evaluation the company compiled data for the three products using both the traditional system and the new ABC system. The traditional system used a single driver (direct material costs). The ABC system uses a variety of cost drivers related to the activities used to produce the hoses. The three products involved in the trial run of the ABC system were D-13, K-17, and R-23. The following data relate to these products, and unit data have been rounded to the nearest penny. a. Determine the gross profit margin for each product produced based on the ABC data [( Selling price ABC cost per unit) Units produced] b. Determine the gross profit margin for each product produced based on the traditional costing data [(Selling price - Traditional cost per unit ) Units produced]. c. Provide a possible explanation as to why the cost of R-23 increased under the ABC system while the cost D-13 decreased. d. Suggest what action management might take with respect to the discoveries resulting from the ABC versus traditional costing analysis. Assume that Hydraulic Hoses expects to produce a gross profit margin on each product of at least 40 percent of the selling price