Era Company produces two kinds of women's handbags: a designer label bag and a private label bag. price competition in the private label market is very strong. therefore it is very important to accurately allocate overhead costs between designer label products and private label products. to achieve that goal Era uses activity-based costing.

Designer Bag Private Label Bag

Quantity Produced 5000 10,000

Material Handling 12,000 13,000

Engineering hours 5,000 2,000

Setups 40 20

Maintenance (hours used) 1000 1000

Inspection hours 2000 500

the information about Era's products is as follows:

The overhead costs associated with the activities are given below:

Activities OH Cost

Material Handling $30,000

Engineering 140,000

Setups 72,000

Maintenance 26,000

Inspection 40,000

Total $308,000

a) Allocate all overhead costs to the two products using activity-based costing.

b) Compute the unit cost of each type of bag.

c) List types of organizations in which ABC may be more/less likely to succeed. Why might there be resistance to adopting an ABC allocation approach?