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Assume that a company makes only three products: Product A, Product B, and Product C. Currently, the company uses a traditional cost system that relles
Assume that a company makes only three products: Product A, Product B, and Product C. Currently, the company uses a traditional cost system that relles on plantwide overhead cost allocation based on direct labor-hours. It is considering replacing its traditional cost system with an activity-based costing (ABC) system for Internal management purposes. The ABC system would include a total of four activities: Assembly (allocated to products based on direct labor-hours), Machine Setups (allocated to products based on number of setups), Material Handling (allocated to products based on the number of material moves), and Product Design (allocated to products based on the number of products). Number of units produced Direct labor hours per unit Number of setups Number of material moves Number of products Product A 1,000 units hours 30 setups 600 moves 1 product Product B 7,000 units 2 hours 50 setups 400 moves 1 product Product C 2,000 units 2 hours 20 setups 200 moves 1 product Using the activity-based costing approach, what percent of the company's total Product Design activity cost would be allocated to Product A
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