Q: What conclusions can you draw about the use of traditional costing versus ABC costing for the Blake Company? What recommendations do you have for the president?

	Flops	Chops
Sales Price per Unit	$200	$600
Direct Materials per Unit	$100	$300
Direct Labor Cost per Unit	$30	$50
Direct Labor Hours per Unit	2	6
Number of Units Produced	30,000	20,000

Traditional Costing System based

	Flops		Chops		Total
Predetermined Variable overhead rate	$1,633,333		$3,266,667		$4,900,000

Traditional Costing System based

	Flops		Chops
Unit Product Costs	$214.44		$763
Contribution Margin per Unit	-$14.44		-$163

ABC costing system based

Activity Cost Pool	Estimated Overhead Cost		Expected Activity Level		Predetermined Overhead Rate
Setups	$860,000		200	setups		$4,300
Scrap	400,000		500	units		$800
Testing	300,000		5,000	tests		$60
Machine Related	2,440,000		100,000	machine related		$24
Total	$4,000,000

ABC costing based

Direct Material per Unit	$100	$300
Direct Labor per Unit	$60	$300
Manufacturing Overhead	$27	$160
Production Cost	$187	$760
Contribution Margin per Unit	$13	-$160