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the adoption of an activity-based costing (ABC) system because the managers suspect d sysierm distorts the product osts. This company produces and sells only two
the adoption of an activity-based costing (ABC) system because the managers suspect d sysierm distorts the product osts. This company produces and sells only two products M407 costing system uses direct labor cost as the allocation base for manufacturing overhead cost determined the cded that major activities are Machine setups, Special Processing, and General factory and costs for each activity. They also identified how many setups, MHs, and DLHs each product requires They Product Price M407150 DM: DLHs/unit $44.001 N501 $ 230 | $72.00 The wage rate per hour is: 20.00 The company collected the data for ABC as follows: Activity Cost Pool Cost Driver or Machine setup Special processing General factory Activity Estimated OH cost # of setups Machine hours Direct-labor hours Total $46,200 55,000 37,500 $138,700 M407 60 8,000 N501 120 12,000 Activity Measure Machine hours 12 Relative to the traditional costing system, the product cost for N501 Under the ABC system is lower by Under the ABC system is higher byS Under the ABC system is lower by Under the ABC system is higher by S None of the above s 23.32 per unit. per unit. S 35.51 per unit. per unit. 23.32 35.51 E
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