Chapter 21, Problem 21.7AP

(a)

To determine

Activity Based Costing: Activity based costing is based on the activities which are require in production process and delivering service. It is similar to conventional costing which accounting direct material and direct labor but differs in case of accounting for manufacturing overhead.

To determine: Assignment of the manufacturing overhead costs to the two products using activity based costing (ABC) and the overhead cost per unit.

(b)

To determine

The cost per unit and gross profit of each model using ABC.

(c)

To determine

To identify: Whether the management future plans for the two models are suitable or not.