Activity-based costing and markup pricing Based on last year's activity, the Moose Jaw Manufacturing Company estimates the following manufacturing support costs for this year for its plant in Moose Jaw, Saskatchewan:

Moose Jaw's plant manufactures three products: A, B, and C. Data per unit are as follows:

Required

a. Determine the product costs using an activity-based costing system.

b. If Moose Jaw's target prices for each product are \(25 \%\) above their respective activity-based costs, what are the target prices for products A, B, and C?

c. At present, production capacity during regular hours is limited to 12,000 machine hours. Capacity can be expanded up to 4,000 additional machine hours by using plant overtime. Overtime premium will add \(50 \%\) to direct labor costs and \(30 \%\) to each manufacturing support cost pool. If Moose Jaw expands its capacity by using plant overtime to provide an additional 4,000 machine hours, what will Moose Jaw's target prices be, using the \(25 \%\) markup described in (b)? What issues should the company consider as it decides whether to expand capacity

COST POOL AMOUNT ACTIVITY COST DRIVERS RATE Machine operations/ $48,000 12,000 machine hours $4.00 maintenance Supervision 45,000 $225,000 direct labor dollars 0.20 Materials handling 75,000 100,000 pounds 0.75 Quality control 66,000 550 inspections 120.00 Machine setups 75,000 250 production runs 300.00 Total $309,000