How is the viability of the four products affected

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Question - The Longley Corporation Ltd is considering whether to introduce activity based costing to determine the cost of each of its four products. The company is currently using a conventional costing system whereby the total overhead costs ($1,650,000) are allocated on the basis of the number of direct labour hours. The table below provides information in relation to the cost of each of the products and the extent to which each of the products consume various resources.

Referring to your answers in the Longley Corporation Ltd question, discuss the differences in the product costs (for products A-D) under the two alternative costing systems i.e. the traditional costing approach and activity based costing (ABC). What are the differences attributed to? How is the viability of the four products affected if ABC is introduced and what are the implications for Longley Corporation Ltd?

Reference no: EM132761195

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