Schiff Company produces seven products. PQ-6 costs $240.00 per unit under their traditional cost system using one cost driver. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of PQ-6 was determined to be $190.00 per unit.
-Given this change in the cost:

Question

Quizplus · Accepted Answer

The new cost of PQ-6 is lower under the ABC system which suggests that the previous cost of $240.00 per unit was overstated. Therefore, PQ-6 can now be sold at a lower price while still maintaining profitability.

Schiff Company Produces Seven Products