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Kupehella Company manufactures compressors of standard design for industrial use. They also accept orders for compressors meeting unique customer requirements. Currently, accountants accumulate all overhead
Kupehella Company manufactures compressors of standard design for industrial use. They also accept orders for compressors meeting unique customer requirements. Currently, accountants accumulate all overhead in a single cost pool and allocate it based on direct labor hours. However, after attending an ABC seminar, they believe implementing ABC would yield valuable information. A study reveals a majority of their overhead cost relates to material maintenance and handling and product design. They select the number of different material parts used and the number of design hours as the activity drivers for the two new cost pools. They will continue to use direct labor hours as the base for allocating all remaining overhead. Accountant provides the following information about Kupehella Company's most recent year of operations: Required: (Use the next page to provide your answers to parts a and b.) Using the current costing system, determine the total and unit cost for each product line. Using the ABC costing system, determine the total and unit cost for each product line. Kupehella Company currently uses a markup on cost of 50 percent using traditional costing to determine the selling price of its products. Since this is their 25th year in business, the Sales Manager has approached you with the idea of hating a 25 percent discount for two weeks starting at the beginning of next month. How would you respond to his suggestion? (Use the space provided below to formulaic your answer for part c.)
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