XYZ Ltd has collected the following data for its two activities. It calculates activity cost rates based on cost-driver capacity:

Required:

(a) Compute the costs allocated to each product from each activity

(b) Calculate the cost of unused capacity for each activity

(c) Discuss the factors the management considers in choosing a capacity level to compute the budgeted faxed overhead cost rate.

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Activity: Power: Cost driver Kilowatt hours Quality inspection: Number of inspections Capacity 20,000 k.w. hrs 5,000 Inspection Cost (Rs.) 1,00,000 2,00,000 The company makes three products X, Y and Z. For the year ended 31 March 2010, the following consumption of cost driver was reported: Kilowatt Quality Product Hours Inspection X 5,000 2,000 Y 3,000 1,000 Z 2,000 1,000