Problem: $30,000 was allocated to overhead costs. The cost of labor is $3 for product A and $3.50 for product B. Total number of A produced is 3000 and B produced is 3000. Direct Material cost for A is $10 and for B is $10.50.The overhead is charged on basis of labor cost. Out of the $30,000 allocated to overhead costs, $10,000 is related to environmental costs. The total spent on waste disposal for both products A and B is $2500, the toxic disposal for product B is $6500 and none for A and regulating fees for product B is $1000 and none for A.
Required:
a) Calculate the unit cost of A and B by traditional cost allocation
b) Calculate the unit cost of A and B by ABC costing method
c) Which of the two is more efficient?