1. You have recently been appointed as management accountant to Bragg Lid. The company manufactures three types of printers. The following details relate to the three products for the production month of June 2021. Product Laser Dot Matrix Ink Jet Output in units BOO Total direct material cost E24,000 ($25,000 1038,000 Total direct labour cost E16,800 210,600 212,600 Machine hours per unit The company currently absorbs overheads on the basis of machine hours. The total production overheads for the month were E130,000. The product cost calculated using absorption costing is as follows: LaBer Dot Matrix Ink Jet E E Material 24,000 25,000 38,000 Labour 16,800 10,600 12,600 Overhead 54 744 34.215 41.068 Total cost 95.644 69,715 89.668 Cost per unit 159 24 139.43 149.43 Overhead Absorption Rate: Total production overheads 130.000 = 22.41 per machine hour Total Machine Hours 5,700 "Total machine hours (600x4)+(500x3]+(600x3) You are considering the introduction of activity based casting and observe that the production overheads are already captured by each cost centre. An analysis of the E130,000 by the percentage attributable to each department is detailed below. You determine the associated cost drivers for each department and their use by each product, which are also included in the table below. You have been advised that each product passes through two machines. The time taken on each machine is detailed below: Laser Dot Matrix Ink Jet Minutes Minutes Minutes Machine A 145 140 100 Machine B 95 40 Total minutes 240 180 180 Coat type Percentage of Total Cost Driver Overhead Cost (%) Machine A 32 Machine time Machine B Machine time Set up 10 Number of set ups Quality Inspection Number of inspections Total 100 I [continued) Activity level for each product LaBer Dot Matrix Ink Jet Total Number of set ups 4,800 4,200 1,800 10,900 Number of inspections 1, 100 1.650 660 3,400 Required: Note: all calculations can be shown to 2 decimal places 3) Calculate the cost per unit of each product using Activity-Based Costing (10 marka) b) In addition given that Bragg Lid aim to achieve a 15% sales margin, calculate the selling prices per unit using both the traditional and ABC casting systems and comment on the results. [3 marks] c) The company has an opportunity to lease a machine (machine 2) that would serve the same purpose as Machine A Machine A was originally purchased for $1,000,000 five and a half years ago. At the time of purchase the assumption was that the machine had an estimated useful life of six years with nil residual value and would be depreciated using the straight line method. Depreciation is charged monthly. The machine could be sold for $100,000. The lease costs of the new machine would be E20,000 per month. Recalculate the cost per unit of each product assuming that the company decides to lease machine Z. Assume the number of units sold, the selling price per unit calculated using ABC and the time taken on each machine remain the same. (4 marks] dj Analyse the impact to Bragg Lid of leasing machine Z
