1 The ABC Company manufactures two products, Product Alpha and Product Beta. Both are produced in a very labour-intensive environment and use similar processes. Alpha and Beta differ by volume. Beta is a high-volume product, while Alpha is a low-volume product. Details of product inputs, outputs and the costs of activities are as follows:

Alpha Beta

Direct labour hours/unit.

Alpha 5

Beta 5

Annual output (units)

Alpha 1,200

Beta 12,000

Number of purchase orders

Alpha 85

Beta 75 total 160

Number of set-ups

Alpha 60

Beta 40 Total 100

Fixed overhead costs amount to a total of $420,000 and have been analysed as follows:

Volume-related $100 000

Purchasing related $145 000

Set-up related $175 000

Using a traditional method of overhead absorption based on labour hours, what is the overhead cost per unit for each unit of product Beta?

A $6.36

B $22.75

C $31.80

D $122.55