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I need detailed help with steps, if you can also show how to calculate unit product cost for each product that would help.

A company is considering the adoption of an ABC system because the managers suspect that their traditional costing system distorts product costs. The company produces and sells two products, Standard and Deluxe. Their traditional costing system uses machine hours as the allocation base for manufacturing overhead cost. The production managers decided that the major activities are Assembly, Machine Setups, and Parts Administration and determined the costs for each activity. They also identified how many machine hours, setups, and parts each product requires.

Additional info:

Price : Standard : $120 per unit , Deluxe : $150 per unit

Cost :

Direct Materials : Standard : $32 per unit Deluxe : $36 per unit

Direct Labor : Standard : $15 per unit Deluxe : $25 per unit

Units Produced : Standard : 200,000 units Deluxe : 100,000 units

Activity:

Assembly (Machine Hours) : Standard : 100,000 Deluxe : 200,000

Machine Setups : Standard : 100 Deluxe : 400

Parts Administration : Standard : 200 Deluxe : 200

Overhead :

Assembly Cost : $1,200,000

Machine Setups : $900,000

Parts Administration : $300,000

Question :

The company is assumed to spend equal money on customer relations among its two customers A and B. Total costs of customer relation for these two customers are $10,000. Customer A placed an order as below. Using the ABC system, the customer margin of customer A is (choose closest answer): Standard : 100 units

Deluxe : 250 units

A) $44,960 B) $45,100 C) $20,010 D) $20,150 E) $25,010

Answer was C) but I need help with steps as to why

Answer & Explanation Solved by verified expert

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