1. Epsilon Corporation

Scenario: Activity-Based Costing (ABC)

Data: Epsilon Corporation manufactures two products: Product X and Product Y. The following information is available:

• Product X: Direct materials $30,000, Direct labor $15,000, Overhead $10,000
• Product Y: Direct materials $25,000, Direct labor $18,000, Overhead $12,000
• Total overhead costs: $25,000

Requirements:

1. Calculate the total cost per unit for Product X and Product Y using ABC.
2. Determine the cost allocation rate for overhead based on activity-based costing.
3. Discuss the benefits of activity-based costing over traditional costing methods.
4. Analyze how activity-based costing improves cost accuracy for Epsilon Corporation.
5. Evaluate the profitability of each product using activity-based costing data.
6. Recommend pricing strategies for Epsilon Corporation based on ABC analysis.