Question: Use activity-based costing! Mango Inc. has long suspected that there is something wrong with their costing system. The sales were increasing, but the profit remained

 Use activity-based costing! Mango Inc. has long suspected that there is

something wrong with their costing system. The sales were increasing, but the

Use activity-based costing!

Mango Inc. has long suspected that there is something wrong with their costing system. The sales were increasing, but the profit remained at a steady level. The company has two products named Apple (3000 units/month) and Banana (5000 units/month). The company has investigated deeper to the activity of their overhead costs, and gathered some information as follows: Total overhead cost: $2,000,000, that consist of: Machine setup: $500,000 (number of setup) . Material handling: $300,000 (number of order) Machine operation: $800,000 (machine hour) Inspection: $100,000 (number of inspection) Packaging: $300,000 (number of unit) The allocation of each product towards every activity are as follows: Apple: 2000 number of setup 3000 number of order 8000 machine hour 1000 number of inspection 1000 number of unit . Banana: 8000 number of setup 7000 number of order 7000 machine hour 5000 number of inspection 9000 number of unit Suppose that unit selling price for Apple was $500 and Banana $500, direct material cost and direct labor cost/unit for Apple was $40 and Banana $100, and previous overhead costing was determined only by machine hour. How is the new costing system affected the profit of the company? Elaborate your analysis

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