Assume that a company makes only three products: Product A, Product B, and Product C....
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Assume that a company makes only three products: Product A, Product B, and Product C. Currently, the company uses a conventional cost system that relies on plantwide overhead cost allocation based on direct labor-hours. It is considering replacing its conventional cost system with an activity-based costing (ABC) system. The ABC system would include a total of four activities: Assembly (allocated to products based on direct labor-hours), Machine Setups (allocated to products based on number of setups), Material Handling (allocated to products based on the number of material moves), and Product Design (allocated to products based on the number of products). Number of units produced Direct labor hours per unit Number of setups Number of material moves Number of products Product A 1,000 units 2 hours 21 setups 600 moves 1 product Product B 7,000 units 2 hours 50 setups 400 moves 1 product Product c 2,000 units 2 hours 29 setups 200 moves 1 product Using the activity-based costing approach, what percent of the company's total Machine Setups activity cost would be allocated to Product C?|
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