Question

The following data are for the two products produced by Tadros Company.

Product A Product B

Direct materials …………………… \(15 per unit \)24 per unit

Direct labor hours ………………… 0.3 DLH per unit 1.6 DLH per unit

Machine hours …………………….. 0.1 MH per unit 1.2 MH per unit

Batches ……………………………... 125 batches 225 batches

Volume ………………………………. 10,000 units 2,000 units

Engineering modifications ……….. 12 modifications 58 modifications

Number of customers ……………… 500 customers 400 customers

Market price ………………………….. \(30 per unit \)120 per unit

The company’s direct labor rate is \(20 per direct labor hour (DLH). Additional information follows.

Costs Driver

Indirect manufacturing

Engineering support …………………… \)24,500 Engineering modifications

Electricity ………………………………… 34,000 Machine hours

Setup costs ……………………………… 52,500 Batches

Nonmanufacturing

Customer service ………………………. 81,000 Number of customers

Required

1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours. What is the gross profit per unit?

2. How much gross profit is generated by each customer of Product A using the plantwide overhead rate? How much gross profit is generated by each customer of Product B using the plantwide overhead rate? What is the cost of providing customer service to each customer? What information is provided by this comparison?

3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?

4. How much gross profit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate?

5. Which method of product costing gives better information to managers of this company? Explain why.

Short answer

Cost per unit under plant-wide method,

For product A =$26.37

For product B = $84.64

Gross profit per unit under the plant-wide method,

For product A = $3.63

For product B = $35.36

Cost per unit under the ABC method,

For product A = $24.3

For product B =$95

Gross profit per unit under the plant-wide method,

For product A = $114

For product B = $125

Step-by-step solution

Meaning of Labor Cost

It is the cost associated with the workforce or human resources of the organization. For example, direct labor (wages to workers), factory indirect labor, office and administration staff salary, and selling and distribution staff salary.

Requirement 1

$$\begin{gathered} \mathit{S}\mathit{i}\mathit{n}\mathit{g}\mathit{l}\mathit{e}\mathbf{}\mathit{P}\mathit{l}\mathit{a}\mathit{n}\mathit{t}\mathit{w}\mathit{i}\mathit{d}\mathit{e}\mathbf{}\mathit{O}\mathit{v}\mathit{e}\mathit{r}\mathit{h}\mathit{e}\mathit{a}\mathit{d}\mathbf{}\mathit{A}\mathit{l}\mathit{l}\mathit{o}\mathit{c}\mathit{a}\mathit{t}\mathit{i}\mathit{o}\mathit{n}\mathbf{}\mathit{R}\mathit{a}\mathit{t}\mathit{e}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{I}\mathbf{n}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{M}\mathbf{a}\mathbf{n}\mathbf{u}\mathbf{f}\mathbf{a}\mathbf{c}\mathbf{t}\mathbf{u}\mathbf{r}\mathbf{i}\mathbf{n}\mathbf{g}\mathbf{}\mathbf{C}\mathbf{o}\mathbf{s}\mathbf{t}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{l}\mathbf{a}\mathbf{b}\mathbf{o}\mathbf{r}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{A}\mathbf{+}\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{l}\mathbf{a}\mathbf{b}\mathbf{o}\mathbf{r}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{B}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{500}\mathbf{+}\mathbf{\$}\mathbf{34}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{52}\mathbf{,}\mathbf{500}}{\left(0.3\times 10,000\right)\mathbf{+}\left(1.6\times 2,000\right)} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{11}\mathbf{,}\mathbf{000}}{\mathbf{6}\mathbf{,}\mathbf{200}} \\ \mathbf{=}\mathbf{\$}\mathbf{17}\mathbf{.}\mathbf{90} \end{gathered}$$

$$\begin{gathered} \mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{A}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{D}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{M}\mathbf{a}\mathbf{t}\mathbf{e}\mathbf{r}\mathbf{i}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{C}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{+}\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{D}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{L}\mathbf{a}\mathbf{b}\mathbf{o}\mathbf{r}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{+}\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{I}\mathbf{n}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\left(\$15\times 10,000\right)\mathbf{+}\left(0.3\times 10,000\times \$20\right)\mathbf{+}\left(\$17.90\times 0.3\times 10,000\right)}{\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{150}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{60}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{53}\mathbf{,}\mathbf{700}}{\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{26}\mathbf{.}\mathbf{37} \end{gathered}$$

$$\begin{gathered} \mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{B}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{D}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{M}\mathbf{a}\mathbf{t}\mathbf{e}\mathbf{r}\mathbf{i}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{C}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{+}\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{D}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{L}\mathbf{a}\mathbf{b}\mathbf{o}\mathbf{r}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{+}\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{I}\mathbf{n}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{u}\mathbf{n}\mathbf{i}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\left(\$24\times 2,000\right)\mathbf{+}\left(1.6\times 2,000\times \$20\right)\mathbf{+}\left(\$17.90\times 1.6\times 2,000\right)}{\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{48}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{64}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{57}\mathbf{,}\mathbf{280}}{\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{84}\mathbf{.}\mathbf{64} \end{gathered}$$

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathit{f}\mathbf{}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{A}\mathbf{=}\mathit{M}\mathit{a}\mathit{r}\mathit{k}\mathit{e}\mathit{t}\mathbf{}\mathit{P}\mathit{r}\mathit{i}\mathit{c}\mathit{e}\mathbf{}\mathit{P}\mathit{e}\mathit{r}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{-}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t} \\ \mathbf{=}\mathbf{\$}\mathbf{30}\mathbf{-}\mathbf{\$}\mathbf{26}\mathbf{.}\mathbf{37} \\ \mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{.}\mathbf{63} \end{gathered}$$

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathit{f}\mathbf{}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{B}\mathbf{=}\mathit{M}\mathit{a}\mathit{r}\mathit{k}\mathit{e}\mathit{t}\mathbf{}\mathit{P}\mathit{r}\mathit{i}\mathit{c}\mathit{e}\mathbf{}\mathit{P}\mathit{e}\mathit{r}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{-}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t} \\ \mathbf{=}\mathbf{\$}\mathbf{120}\mathbf{-}\mathbf{\$}\mathbf{84}\mathbf{.}\mathbf{64} \\ \mathbf{=}\mathbf{\$}\mathbf{35}\mathbf{.}\mathbf{36} \end{gathered}$$

Requirement 2

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{}\mathit{b}\mathit{y}\mathbf{}\mathit{e}\mathit{a}\mathit{c}\mathit{h}\mathbf{}\mathit{c}\mathit{u}\mathit{s}\mathit{t}\mathit{o}\mathit{m}\mathit{e}\mathit{r}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{A}\mathbf{=}\frac{\mathbf{G}\mathbf{r}\mathbf{o}\mathbf{s}\mathbf{s}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{f}\mathbf{i}\mathbf{t}\mathbf{}\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}}{\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{c}\mathbf{u}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{m}\mathbf{e}\mathbf{r}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{3}\mathbf{.}\mathbf{63}\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}}{\mathbf{500}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{36}\mathbf{,}\mathbf{300}}{\mathbf{500}} \\ \mathbf{=}\mathbf{\$}\mathbf{72}\mathbf{.}\mathbf{6} \end{gathered}$$

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{}\mathit{b}\mathit{y}\mathbf{}\mathit{e}\mathit{a}\mathit{c}\mathit{h}\mathbf{}\mathit{c}\mathit{u}\mathit{s}\mathit{t}\mathit{o}\mathit{m}\mathit{e}\mathit{r}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{B}\mathbf{=}\frac{\mathbf{G}\mathbf{r}\mathbf{o}\mathbf{s}\mathbf{s}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{f}\mathbf{i}\mathbf{t}\mathbf{}\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}}{\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{c}\mathbf{u}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{m}\mathbf{e}\mathbf{r}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{35}\mathbf{.}\mathbf{36}\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}}{\mathbf{400}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{70}\mathbf{,}\mathbf{720}}{\mathbf{400}} \\ \mathbf{=}\mathbf{\$}\mathbf{176}\mathbf{.}\mathbf{8} \end{gathered}$$

$$\begin{gathered} \mathit{C}\mathit{u}\mathit{s}\mathit{t}\mathit{o}\mathit{m}\mathit{e}\mathit{r}\mathbf{}\mathit{S}\mathit{e}\mathit{r}\mathit{v}\mathit{i}\mathit{c}\mathit{e}\mathbf{}\mathit{C}\mathit{o}\mathit{s}\mathit{t}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{c}\mathit{u}\mathit{s}\mathit{t}\mathit{o}\mathit{m}\mathit{e}\mathit{r}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{C}\mathbf{u}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{m}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{S}\mathbf{e}\mathbf{r}\mathbf{v}\mathbf{i}\mathbf{c}\mathbf{e}\mathbf{}\mathbf{C}\mathbf{o}\mathbf{s}\mathbf{t}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{C}\mathbf{u}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{m}\mathbf{e}\mathbf{r}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{81}\mathbf{,}\mathbf{000}}{\mathbf{500}\mathbf{+}\mathbf{400}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{81}\mathbf{,}\mathbf{000}}{\mathbf{900}} \\ \mathbf{=}\mathbf{\$}\mathbf{90} \end{gathered}$$

The comparison of gross profit per customer provides that on an average each customer generate $72.6of gross profit for product A and $176.8of gross profit for product B.

Since the customer service cost per customer is the same for both the product, Product A returns a net loss of $17.4 and product B returns a net profit of $86.8. As the net profit by product B is larger than the loss by product A, the loss per customer would be covered by product B and there would be a total net profit on the sale of both products.

Requirement 3Computation of manufacturing cost using ABC for product A

$$\begin{gathered} \mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{L}\mathit{a}\mathit{b}\mathit{o}\mathit{r}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{l}\mathbf{a}\mathbf{b}\mathbf{o}\mathbf{r}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{\times }\mathbf{R}\mathbf{a}\mathbf{t}\mathbf{e}}{\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{(}\mathbf{0}\mathbf{.}\mathbf{3}\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}\mathbf{)}\mathbf{\times }\mathbf{\$}\mathbf{20}}{\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{6} \end{gathered}$$

$$\begin{gathered} \mathit{E}\mathit{n}\mathit{g}\mathit{i}\mathit{n}\mathit{e}\mathit{e}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{S}\mathit{u}\mathit{p}\mathit{p}\mathit{o}\mathit{r}\mathit{t}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{E}\mathbf{n}\mathbf{g}\mathbf{i}\mathbf{n}\mathbf{e}\mathbf{e}\mathbf{r}\mathbf{i}\mathbf{n}\mathbf{g}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{o}\mathbf{t}\mathbf{i}\mathbf{f}\mathbf{i}\mathbf{c}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{A}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{o}\mathbf{t}\mathbf{i}\mathbf{f}\mathbf{i}\mathbf{c}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{\times }\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{500}\mathbf{\times }\mathbf{12}}{\left(12+58\right)\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{294}\mathbf{,}\mathbf{000}}{\mathbf{70}\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{42} \end{gathered}$$

$$\begin{gathered} \mathit{E}\mathit{l}\mathit{e}\mathit{c}\mathit{t}\mathit{r}\mathit{i}\mathit{c}\mathit{i}\mathit{t}\mathit{y}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{E}\mathbf{l}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{r}\mathbf{i}\mathbf{c}\mathbf{i}\mathbf{t}\mathbf{y}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{\times }\mathbf{M}\mathbf{a}\mathbf{c}\mathbf{h}\mathbf{i}\mathbf{n}\mathbf{e}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{A}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{M}\mathbf{a}\mathbf{c}\mathbf{h}\mathbf{i}\mathbf{n}\mathbf{e}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{\times }\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{34}\mathbf{,}\mathbf{000}\mathbf{\times }\left(0.1\times 10,000\right)}{\left(0.1\times 10,000\right)\mathbf{+}\left(1.2\times 2,000\right)\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{34}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{1}\mathbf{,}\mathbf{000}}{\left(1,000+2,400\right)\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{1} \end{gathered}$$

$$\begin{gathered} \mathit{S}\mathit{e}\mathit{t}\mathit{u}\mathit{p}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{S}\mathbf{e}\mathbf{t}\mathbf{u}\mathbf{p}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{b}\mathbf{a}\mathbf{t}\mathbf{c}\mathbf{h}\mathbf{e}\mathbf{s}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{A}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{b}\mathbf{a}\mathbf{t}\mathbf{c}\mathbf{h}\mathbf{e}\mathbf{s}\mathbf{\times }\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{52}\mathbf{,}\mathbf{500}\mathbf{\times }\mathbf{125}}{\left(125+225\right)\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{52}\mathbf{,}\mathbf{500}\mathbf{\times }\mathbf{125}}{\mathbf{350}\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{1}\mathbf{.}\mathbf{875} \end{gathered}$$

role="math" localid="1660218712709" $$\begin{gathered} \mathit{T}\mathit{o}\mathit{t}\mathit{a}\mathit{l}\mathbf{}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{A}\mathbf{=}\mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{M}\mathit{a}\mathit{t}\mathit{e}\mathit{r}\mathit{i}\mathit{a}\mathbf{}\mathit{C}\mathit{o}\mathit{s}\mathit{t}\mathbf{+}\mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{l}\mathit{a}\mathit{b}\mathit{o}\mathit{r}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{+}\mathit{I}\mathit{n}\mathit{d}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{C}\mathit{o}\mathit{s}\mathit{t} \\ \mathbf{=}\mathbf{\$}\mathbf{15}\mathbf{+}\mathbf{\$}\mathbf{6}\mathbf{+}\mathbf{(}\mathbf{\$}\mathbf{0}\mathbf{.}\mathbf{42}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{.}\mathbf{875}\mathbf{)} \\ \mathbf{=}\mathbf{\$}\mathbf{24}\mathbf{.}\mathbf{295}\mathit{o}\mathit{r}\mathbf{\$}\mathbf{24}\mathbf{.}\mathbf{30} \end{gathered}$$

Computation of manufacturing cost using ABC for product B

$$\begin{gathered} \mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{L}\mathit{a}\mathit{b}\mathit{o}\mathit{r}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{d}\mathbf{i}\mathbf{r}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{l}\mathbf{a}\mathbf{b}\mathbf{o}\mathbf{r}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{\times }\mathbf{R}\mathbf{a}\mathbf{t}\mathbf{e}}{\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\left(1.6\times 2,000\right)\mathbf{\times }\mathbf{\$}\mathbf{20}}{\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{32} \end{gathered}$$

$$\begin{gathered} \mathit{E}\mathit{n}\mathit{g}\mathit{i}\mathit{n}\mathit{e}\mathit{e}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{S}\mathit{u}\mathit{p}\mathit{p}\mathit{o}\mathit{r}\mathit{t}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{E}\mathbf{n}\mathbf{g}\mathbf{i}\mathbf{n}\mathbf{e}\mathbf{e}\mathbf{r}\mathbf{i}\mathbf{n}\mathbf{g}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{o}\mathbf{t}\mathbf{i}\mathbf{f}\mathbf{i}\mathbf{c}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{}\mathbf{B}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{o}\mathbf{t}\mathbf{i}\mathbf{f}\mathbf{i}\mathbf{c}\mathbf{a}\mathbf{t}\mathbf{i}\mathbf{o}\mathbf{n}\mathbf{\times }\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{24}\mathbf{,}\mathbf{500}\mathbf{\times }\mathbf{58}}{\left(12+58\right)\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{421}\mathbf{,}\mathbf{000}}{\mathbf{70}\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{10}\mathbf{.}\mathbf{15} \end{gathered}$$

role="math" localid="1660218997456" $$\begin{gathered} \mathit{E}\mathit{l}\mathit{e}\mathit{c}\mathit{t}\mathit{r}\mathit{i}\mathit{c}\mathit{i}\mathit{t}\mathit{y}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{E}\mathbf{l}\mathbf{e}\mathbf{c}\mathbf{t}\mathbf{r}\mathbf{i}\mathbf{c}\mathbf{i}\mathbf{t}\mathbf{y}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{\times }\mathbf{M}\mathbf{a}\mathbf{c}\mathbf{h}\mathbf{i}\mathbf{n}\mathbf{e}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{A}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{M}\mathbf{a}\mathbf{c}\mathbf{h}\mathbf{i}\mathbf{n}\mathbf{e}\mathbf{}\mathbf{h}\mathbf{o}\mathbf{u}\mathbf{r}\mathbf{\times }\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{34}\mathbf{,}\mathbf{000}\mathbf{\times }\left(1.2\times 2,000\right)}{\left(0.1\times 10,000\right)\mathbf{+}\left(1.2\times 2,000\right)\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{34}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{400}}{\left(1,000+2,400\right)\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{12} \end{gathered}$$

$$\begin{gathered} \mathit{S}\mathit{e}\mathit{t}\mathit{u}\mathit{p}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{=}\frac{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{S}\mathbf{e}\mathbf{t}\mathbf{u}\mathbf{p}\mathbf{}\mathbf{c}\mathbf{o}\mathbf{s}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{b}\mathbf{a}\mathbf{t}\mathbf{c}\mathbf{h}\mathbf{e}\mathbf{s}\mathbf{}\mathbf{b}\mathbf{y}\mathbf{}\mathbf{A}}{\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{o}\mathbf{.}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{b}\mathbf{a}\mathbf{t}\mathbf{c}\mathbf{h}\mathbf{e}\mathbf{s}\mathbf{\times }\mathbf{T}\mathbf{o}\mathbf{t}\mathbf{a}\mathbf{l}\mathbf{}\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{s}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{52}\mathbf{,}\mathbf{500}\mathbf{\times }\mathbf{225}}{\left(125+225\right)\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{52}\mathbf{,}\mathbf{500}\mathbf{\times }\mathbf{225}}{\mathbf{350}\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}} \\ \mathbf{=}\mathbf{\$}\mathbf{16}\mathbf{.}\mathbf{875} \end{gathered}$$

role="math" localid="1660219176271" $$\begin{gathered} \mathit{T}\mathit{o}\mathit{t}\mathit{a}\mathit{l}\mathbf{}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{A}\mathbf{=}\mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{M}\mathit{a}\mathit{t}\mathit{e}\mathit{r}\mathit{i}\mathit{a}\mathit{l}\mathbf{}\mathit{C}\mathit{o}\mathit{s}\mathit{t}\mathbf{+}\mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{l}\mathit{a}\mathit{b}\mathit{o}\mathit{r}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{+}\mathit{I}\mathit{n}\mathit{d}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{C}\mathit{o}\mathit{s}\mathit{t} \\ \mathbf{=}\mathbf{\$}\mathbf{24}\mathbf{+}\mathbf{\$}\mathbf{32}\mathbf{+}\left(\$10.15+\$12+\$16.875\right) \\ \mathbf{=}\mathbf{\$}\mathbf{95}\mathbf{.}\mathbf{025}\mathit{o}\mathit{r}\mathbf{\$}\mathbf{95} \end{gathered}$$

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{A}\mathbf{=}\mathit{M}\mathit{a}\mathit{r}\mathit{k}\mathit{e}\mathit{t}\mathbf{}\mathit{P}\mathit{r}\mathit{i}\mathit{c}\mathit{e}\mathbf{-}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathbf{cos}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t} \\ \mathbf{=}\mathbf{\$}\mathbf{30}\mathbf{-}\mathbf{\$}\mathbf{24}\mathbf{.}\mathbf{30} \\ \mathbf{=}\mathbf{\$}\mathbf{5}\mathbf{.}\mathbf{7} \end{gathered}$$

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{B}\mathbf{=}\mathit{M}\mathit{a}\mathit{r}\mathit{k}\mathit{e}\mathit{t}\mathbf{}\mathit{P}\mathit{r}\mathit{i}\mathit{c}\mathit{e}\mathbf{-}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{c}\mathit{o}\mathit{s}\mathit{t}\mathbf{}\mathit{p}\mathit{e}\mathit{r}\mathbf{}\mathit{u}\mathit{n}\mathit{i}\mathit{t} \\ \mathbf{=}\mathbf{\$}\mathbf{120}\mathbf{-}\mathbf{\$}\mathbf{95} \\ \mathbf{=}\mathbf{\$}\mathbf{25} \end{gathered}$$

Requirement 4

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathit{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathit{}\mathit{b}\mathit{y}\mathit{}\mathit{e}\mathit{a}\mathit{c}\mathit{h}\mathit{}\mathit{c}\mathit{u}\mathit{s}\mathit{t}\mathit{o}\mathit{m}\mathit{e}\mathit{r}\mathit{}\mathit{f}\mathit{o}\mathit{}\mathit{r}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathit{}\mathit{A}\mathbf{=}\frac{\mathbf{G}\mathbf{r}\mathbf{o}\mathbf{s}\mathbf{s}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{f}\mathbf{i}\mathbf{t}\mathbf{}\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}}{\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{c}\mathbf{u}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{m}\mathbf{e}\mathbf{r}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{5}\mathbf{.}\mathbf{7}\mathbf{\times }\mathbf{10}\mathbf{,}\mathbf{000}}{\mathbf{500}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{57}\mathbf{,}\mathbf{000}}{\mathbf{500}} \\ \mathbf{=}\mathbf{\$}\mathbf{114} \end{gathered}$$

$$\begin{gathered} \mathit{G}\mathit{r}\mathit{o}\mathit{s}\mathbf{}\mathit{P}\mathit{r}\mathit{o}\mathit{f}\mathit{i}\mathit{t}\mathbf{}\mathit{b}\mathit{y}\mathbf{}\mathit{e}\mathit{a}\mathit{c}\mathit{h}\mathbf{}\mathit{c}\mathit{u}\mathit{s}\mathit{t}\mathit{o}\mathit{m}\mathit{e}\mathit{r}\mathbf{}\mathit{f}\mathit{o}\mathit{r}\mathbf{}\mathit{p}\mathit{r}\mathit{o}\mathit{d}\mathit{u}\mathit{c}\mathit{t}\mathbf{}\mathit{B}\mathbf{=}\frac{\mathbf{G}\mathbf{r}\mathbf{o}\mathbf{s}\mathbf{s}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{f}\mathbf{i}\mathbf{t}\mathbf{}\mathbf{p}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}\mathbf{\times }\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{p}\mathbf{r}\mathbf{o}\mathbf{d}\mathbf{u}\mathbf{c}\mathbf{t}}{\mathbf{N}\mathbf{u}\mathbf{m}\mathbf{b}\mathbf{e}\mathbf{r}\mathbf{}\mathbf{o}\mathbf{f}\mathbf{}\mathbf{c}\mathbf{u}\mathbf{s}\mathbf{t}\mathbf{o}\mathbf{m}\mathbf{e}\mathbf{r}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{25}\mathbf{\times }\mathbf{2}\mathbf{,}\mathbf{000}}{\mathbf{400}} \\ \mathbf{=}\frac{\mathbf{\$}\mathbf{50}\mathbf{,}\mathbf{000}}{\mathbf{400}} \\ \mathbf{=}\mathbf{\$}\mathbf{125} \end{gathered}$$

Gross profit per customer is adequate as per the number of products produced and the number of customer to whom sold for each product.

Requirement 5

ABC system gives a better picture to the managers regarding the total cost per unit. Under ABC system the indirect cost is allocated as per the activity level for each product. Thus there is no chance of having overvalued or undervalued overhead allocation. The overhead allocated to each product matches with the activity level.

So based on this, the ABC system more accurate information rather than the traditional method.