Epsilon Foods

• Epsilon Foods produces two products: Chocolate and Cookies.
• Chocolate: Direct materials - $70,000, Direct labor - $40,000, Overhead - $20,000
• Cookies: Direct materials - $50,000, Direct labor - $30,000, Overhead - $15,000

The company uses traditional costing with overhead allocated based on direct labor hours. The total overhead cost is $35,000, and the total direct labor hours are 5,000. Chocolate uses 2,000 labor hours, and Cookies use 3,000 labor hours.

Requirement: Calculate the total cost for each product using traditional costing and compare it with the ABC method. Discuss the impact of the costing method on product pricing and profitability.

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