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A computer manufacturer produces three types of devices: mobile phones,
tablets, and computers. For the production of these three devices you
have the following information:
Material cost per unit
Direct labor hours per unit
Labor cost per hour
Overhead costs per annum
Audit and legal
ABC analysis suggested that overhead costs are distributed to the three products according to the table below:
Audit and legal
each of the three products, the company aims at a different percentage
for profit. Under the full absorption costing method and the targeted
profit percentage, the prices of the three products should be:
Full costing price
the aimed profit percentages for the three products and under the full
absorption costing method, with overhead costs absorbed on the basis of
direct labour hours.
Use the profit percentages that you derived in (1) and calculate the prices of the three products under the ABC system.
Recommend a cost system and include any changes that you would suggest to the pricing strategy of the computer company