Exercise 04-12 Using ABC for strategic decisions LO P1, P3 Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced Direct labor cost (@ $29 per DLH) Direct materials cost Product A 12,500 units 0.20 DLH per unit $ 2.10 per unit Product B 1,700 units 0.28 DLH per unit $ 2.70 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $161,926 55,000 68,770 $285, 696 Required: 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit for each product line. 0 per direct labor hour Overhead costs Direct labor hours Overhead Assigned Product A Product B Activity Driver Plantwide OH rate Total Overhead Cost Units Produced OH Cost per unit Product A Product B 2. If the market price for Product A is $32.22 and the market price for Product B is $61, determine the profit or loss per unit for each product. Product A Product B Market price 3. Consider the following additional information about these two product lines. If ABC is used for assigning overhead costs to products, what is the cost per unit for Product A and for Product B? Product A Product B Number of setups required for production 8 setups 28 setups Number of parts required 6 part/unit 4 part/unit Inspection hours required 54 hours 245 hours of Machine setup Overhead costs Number of setups Materials handling Overhead costs Number of parts Quality control Overhead costs Inspection hours 01 0 Activity Driver Activity Rate Total Overhead Cost Overhead Assigned Product A Machine setup Materials handling Quality control setups parts inspection hours per setup per part per direct labor hour S 0 Product B Machine setup Materials handling Quality control S 0 Product A Product B Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit 4. Determine the profit or loss per unit for each product assuming ABC costing. Product A Market price Product B 4.2 Based on your results in part 4, should the profit or loss per unit for each product influence company strategy? O No O Yes