Caleb Enterprises Ltd. manufactures electrical cables for households and industries. The company has identified the following overheads activities, costs, and activity drivers for the coming year.

The company’s normal activity requires 8,500 direct labor-hours. The following two electrical cables were manufactured during the year:

Required

1. Compute the unit cost for each cable using direct labor hours to apply the manufacturing overheads.
2. Compute the unit cost for each job using the ABC system.
3. What is the advantage of using a simple and ABC systems by Caleb Enterprises Ltd.’s management?

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Activity Setup costs Placement costs Machine costs Customer service Expected Cost € 50,000 € 50,000 €100,000 € 33,000 Activity Driver Number of setups Number of placements Machine-hours Complaints received Activity Capacity 400 5,300 20,000 25,000