Advanced: Comparison of traditional product costing with ABC Duo pic produces two products A and B. Each has two components specified as sequentially numbered parts i.e. product A (parts 1 and 2) and product B (parts 3 and 4). Two production depart¬ ments (machinery and fitting) are supported by five service activities (material procurement, material handling, maintenance, quality control and set up). Product A is a uniform product manufactured each year in 12 monthly high volume production runs. Product B is manufactured in low volume cus¬ tomised batches involving 25 separate production runs each month. Additional information is as follows:

You are required to compute the unit costs for products A and B using (i) a traditional volume- based product costing system and (ii) an activity- based costing system.
(Adapted from Innes, J. and Mitchell, F., Activ¬ ity Based Costing: A Review with Case Studies, Chartered Institute of Management Accountants, 1990)

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Product A Product B Production details: Components Annual volume produced Parts 1, 2 300 000 units Parts 3, 4 300 000 units Annual direct labour hours: Machinery department 500 000 DLH 600 000 DLH Fitting department 150 000 DLH 200 000 DLH