Question: Chester Inc has identified activity centers to which overhead costs

Chester Inc. has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected activity drivers for 2013 follow.

The company’s products and other operating statistics follow.

a. Determine unit product cost using the appropriate cost drivers for each product.
b. Before it installed an ABC system, Chester used a traditional costing system that allocated factory overhead to products using direct labor hours. The firm operates in a competitive market and sets product prices at cost plus a 25 percent markup.
1. Calculate unit costs based on traditional costing. (Round to the nearest cent.)
2. Determine selling prices based on unit costs for traditional costing and for ABC. (Round to the nearest cent.)
c. Discuss the problems related to setting prices based on traditional costing and explain how ABC improves theinformation.

  • CreatedJune 03, 2014
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