Preparation of conventional costing and ABC profit statements The following budgeted information relates to Brunti ple for the forthcoming period:

Overheads allocated and apportioned to production departments (including service cost centre costs)
were to be recovered in product costs as follows:

You ascertain that the above overheads could be reanalysed into ‘cost pools’ as follows:

You have also been provided with the following estimates for the period:

Required:

(a) Prepare and present profit statements using:
(i) conventional absorption costing;
(5 marks)
(ii) activity-based costing; (10 marks)

(b) Comment on why activity-based costing is considered to present a fairer valuation of the product cost per unit.

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Products XYI YZT ABW (000) (000) (000) Sales and production (units) 50 40 30 () () () Selling price (per unit) 45 95 73 32 84 65 Prime cost (per unit) Hours Hours Hours Machine department (machine hours per unit) Assembly department (direct labour hours per unit) 2 5 4 7 3 2