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Activity based costing vs traditional costing

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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.

Activity        Overhead
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

Question 1:
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?

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Solution Summary

The solution contains the computation of cost under activity based costing and traditional costing and to arrive at a decision which is preferable.