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struggling in this question, it is about cost management. Please:) Demski Company has used a two-stage cost allocation system for many years. In the first

struggling in this question, it is about cost management. Please:)

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Demski Company has used a two-stage cost allocation system for many years. In the first stage, t overhead costs are allocated to two production departments, Pl and P2 based on machine In the second stage, Demski uses direct labor hours to assign overhead costs from the production departments to individual products A and B. factory overhead costs for the year are $300,000. Both the budgeted and actual e hours in P1 and P2 are 12,000 and 28,000 hours, respectively After attending a seminar to earn the potential benefits of adopting an activity-based costing system (ABC), Ted Demski, the president of Demski Company, is considering implementing an ABC system. Upon his request, the controller at Demski Company has compiled the following Factory Activity cost Expected Cost Pool activity level 1,000 2.500 25,000 10,000 $100,000 Setup hours Machine setup Power Total overhead cost 50,000 Inspection hours 50,000 Kilowatt hours 100,000 Direct labor hours Demski manufactures two types of product A and B, for which the following information is available: Units produced and sold Direct materials Direct labor costs Direct labor hours in PI Direct labor hours in P2 Setup hours Inspection hours Power (kilowatt hours) 5,000 10,000 $200,000 S250,000 $80,000 50,000 3,000 .500 .500 700 300 1,000 12.300 2.500 Required (1) Determine the unit cost for each of the two products using the traditional two-stage (2) Determine the unit cost for each of the two products using the proposed ABC system. (3) Compare the unit manufacturing costs for product A and product B computed in allocation method. requirements 1 and 2. Discuss why the two cost systems differ in their total cost for each product and the importance of these differences to the Demski Company

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