The cost accountant of Don't Blame The Kids is considering to use the ABC system in determining the cost of its products. At present, the company uses the traditional costing system wherein factory overhead costs are allocated based on direct labor hours. The cost accountant believes that the present system maybe providing misleading cost information, hence, the plan to change to the ABC system. For the coming period, the company is planning to use $5,000 direct labor hours, and its total budgeted factory overhead amounts to $90,000, broken down as follows:

Activity	Cost Driver	Budgeted Activity	Budgeted Cost
Setup costs	Number of setups	40	$20,000
Production monitoring	Number of batches	20	$40,000
Quality control	Number of inspections	1,000	$30,000

Projected data for one of the DBTK Company’s product, Product B, for the coming period are as follows:

Production and sales: 1,000 units

Direct labor hours: 2,000 hours

Units per batch: 500

Number of setups: 4

Number of inspections: 200

Direct material cost: $10 per unit

Direct labor rate: $20 per hour

Question/s:

1. If the Company will use the traditional full cost system, the cost per unit of product B for the coming period will be?

2. If the Company will use the ABC system, the cost per unit of product B for the coming year will be?

Answer rating: 100% (QA)

Computation of single overhead rate Total Overhead Total ... View the full answer