General Electric (GE) is implementing activity-based costing (ABC). The following activities and costs are identified for the production of 1,000 units of a product:
•Machine setup: $50,000
•Quality inspections: $30,000
•Product design: $20,000
Activity drivers:
•Machine setups: 10
•Quality inspections: 15
•Product design hours: 200
Required:
1.Calculate the cost per activity driver.
2.Determine the total cost assigned to each product unit.
3.Discuss the advantages of ABC over traditional costing methods.