I hope this is enough information, but I am seeking a professional opinion on which costing system would work best based on the information below. This is a two question request.
Cost pool Costs Product C Product D Total
Machine set-up $13,630 130 160 290
Purchase orders $85,750 750 1,000 1,750
General factory $67,760 4,000 2,160 6,160
Unit cost $43.43 $29.73
You are a product manager for product D and are evaluated based on product profitability, which method (activity based costing or the traditional system based on direct labor hours) would you prefer?
Question 2: The government wants to buy product C and will pay for the cost of the product plus a fixed fee. Should you adopt the ABC system or keep the old plant wide overhead system and why?© BrainMass Inc. brainmass.com March 21, 2019, 6:21 pm ad1c9bdddf
The solution contains the computation of cost under activity based costing and traditional costing and to arrive at a decision which is preferable.