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PROBLEM 6 The cost accountant of Above the Ankle is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing system wherein factory overhead costs are allocated based on direct labor hours. The cost accountant believes that the present system maybe providing misleading cost information, hence, the plan to change to the ABC system. For the coming period, the company is planning to use 5,000 direct labor hours, and its total budgeted factory overhead amounts to P90,000, broken down as follows: Activity Cost Driver Budgeted Activity Setup costs Number of set ups 40 Budgeted Cost P20,000 Production monitoring Number of batches 20 P40,000 Quality control Number of inspections 1,000 P30,000 Projected data for one of the Company's product, Product B, for the coming period are as follows: Production and sales Direct labor hours Units per batch Number of setups 1,000 units 2,000 hours 500 4 Number of inspections Direct material cost Direct labor rate 200 P10 per unit P20 per hour 1. If the Company will use the traditional full cost system, the cost per unit of product B for the coming period will be 2. If the Company will use the ABC system, the cost per unit of product B for the coming year will be