Exercise 04-12 Using ABC for strategic decisions LO P1, P3 Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round "OH rate and cost per unit" answers to 2 decimal places.) Number of units produced Direct labor cost (@ $24 per DLH) Direct materials cost Product A 10,000 units 0.20 DLH per unit $ 2 per unit Product B 2,000 units 0.25 DLH per unit $ 3 per unit Activity Machine setup Materials handling Quality control inspections Overhead costs $121,000 48,000 80,000 $ 249,000 Required: 1. Using direct labor hours as the basis for assigning overhead costs, determine the total production cost per unit 0 Overhead Assigned Activity Driver Plantwide OH rate Total Overhead Cost Product A Product B Product A Product B 2. If the market price for Product A is $20 and the market price for Product B is $60, determine the profit or loss per Product A Product B Market price 3. Consider the following additional information about these two product lines. If ABC is used for assigning overhe per unit for Product A and for Product B? Product A Produc Number of setups required for production 10 setups 12 se Number of parts required 1 part/unit 3 pa Inspection hours required 40 hours 210 hc Machine setup 0 Materials handling 0 Quality control 0 Overhead Assigned Activity Driver Activity Product A Machine setup Materials handling Overhead Assigned Activity Driver Activity Product A Machine setup Materials handling Quality control Product B Machine setup Materials handling Quality control Product A Product B Total manufacturing costs Direct Materials per unit Direct Labor per unit Overhead per unit Total manufacturing cost per unit 4. Determine the profit or loss per unit for each product assuming ABC costing. Product A Product B Market price 4. Determine the profit or loss per unit for each product assuming ABC costing. Product A Product B Market price 4.2 Based on your results in part 4, should the profit or loss per unit for each product influence company strategy? Yes No