E$-$M:$4-22.$ Using activity$-$based costing to make decisions $($Learning Objectives $1,2,3)$

Fido Dog Collars uses activity$-$based costing. Fido Dog Collars$$ system has the following features:

Each collar has four parts, direct materials cost is $$9\mathrm{.}00$ per collar, and direct labor cost is $$4\mathrm{.}00$ per collar. Suppose Dowling Pet Center has asked for a bid on $25,000$ dog collars. Fido Dog Collars will issue a total of $150$ purchase orders if Dowling Pet Center accepts Fido Dog Collars$$ bid.

Requirements

$1.$ Cost per collar $$15\mathrm{.}08$

Compute the total estimated cost Fido Dog Collars will incur to purchase the needed materials and then assemble and package $25,000$ dog collars. Also compute the cost per collar.

For bidding, Fido Dog Collars adds a $40\%$ markup to total cost. What total price will the company bid for the entire Dowling Pet Center order?

Suppose that instead of an ABC system, Fido Dog Collars has a traditional product costing system that allocates indirect costs at the rate of $$9\mathrm{.}60$ per direct labor hour. The dog collar order will require $12,000$ direct labor hours. What total price will Fido Dog Collars bid using this system$$s total cost?

Use your answers to Requirements $2$ and $3$ to explain how ABC can help Fido Dog Collars make a better decision about the bid price