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Calculate the gross profit $ and % for each of the three products using the activity-based costing system.

Activity Based Costing Problem The Greek Widget Company produces three products: Alpha, Beta, and Zeta. The company uses a normal cost system and overhead costs are currently charged to products using a plant-wide overhead rate based on machine hours. Because of considerable differences in the support cost needs of each product, it is probably advisable that the company switch to an activity- costing system to charge overhead to products. based The company expects to produce 1,000 Alphas, 3,400 Betas, and 600 Zetas in fiscal year 2000. Each Alpha requires 20 direct labor hours and 43 machine hours, Betas require 50 direct labor hours and 30 machine hours, and Zetas require 80 direct labor hours and 25 machine hours. The total direct labor hours and total machine hours the company expects to operate next year a 238,000 direct labor hours and 160,000 machine hours. re Machine Enginnering Inspection & $170,000 $320,000 $470,000 34 setups 400 En. Ch. 5,000 units Total Overhead S $960,000 Item Overhead S Activity Levels Based on an analysis of the three overhead activities, it was estimated that the three products would require these activities as follows in fiscal year 2017: Machine Setups Engineering Charges Inspection & Packaging 5 setups 140 changes 1,000 units 9 setups 8 changes 3,400 units 20 setups 252 changes 600 units Totals 34 setups 400 changes 5,000 units The direct material costs, direct labor costs, and target sales price for the three products are as follows S300 $730 Direct Materials/unit Direct Labor/unit Target Sales Price/unit $680 $900 $2,200 $%1,600 $2,400 S560 $850

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