Upsilon Foods

• Upsilon Foods is evaluating the cost structure of two products: Chocolate and Cake.
• Chocolate: Direct materials - $70,000, Direct labor - $30,000, Overhead - $15,000
• Cake: Direct materials - $90,000, Direct labor - $50,000, Overhead - $25,000
• The company applies overhead based on direct labor hours. Total direct labor hours: 6,000. Chocolate uses 2,500 labor hours, and Cake uses 3,500 labor hours.

Requirement: Calculate the total cost for each product using traditional costing and compare it with the ABC method. Discuss the impact of the costing method on product pricing and profitability.

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