Calculation of ABC product costs and a discussion of the usefulness of ABC Trimake Limited makes three main products, using broadly the same production methods and equip- ment for each. A conventional product costing system is used at present, although an activity- based costing (ABC) system is being considered. Details of the three products for a typical period are:

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Hours per unit Materials Volumes per Labour Machine hours hours unit Units Product X 11 Product Y 1 1 Product Z 1 3 222 20 750 12 1250 25 7000 Direct labour costs 6 per hour and production overheads are absorbed on a machine hour basis. The rate for the period is 28 per machine hour. (a) You are required to calculate the cost per unit for each product using conventional methods. (4 marks) Further analysis shows that the total of production overheads can be divided as follows: (%) Costs relating to set-ups Costs relating to machinery 22 35 20