(6 marks) The management accountant has suggested a review of costing and pricing processes before a decision whether or not to discontinue the shredder is made. The overhead pool has been analyzed as follows: 250,500.00 160,500.00 Overheads relating to administration and requisitions* Building related overheads* Senior management and support function salaries Warranty costs Quality control costs Machine related costs (depreciation, insurance etc.) Set up costs 220,500.00 42,000.00 98,100.00 355,500.00 10,682.00 1,137,782.00 The following analysis has also been undertake with respect to potential cost drivers Data Products Rotavator Chainsaw Shredder Direct labour hours per unit 23 3 8 36 60 66 Total number of quality control inspections per product line (for total output) Material costs per unit 570.00 150.00 160.00 4 3 10 Machine hours per unit Warranty claims per year in relation to total output of each product Batch sizes for production runs 13 40 200 25 50 100 Due to the complexity of activity mapping it has been decided that all overhead * pools marked with above should be absorbed to products on the basis of direct labour hours for this exploratory exercise. b) Rework your calculations in a) but assuming that overheads are absorbed on the basis of activity based costing. (9 marks) c) Compare and contrast your answers to a) and b) and interpret the results in minimum of 200 words and maximum of 300 words. Provide advice to ADG with respect to the discontinuation of the Shredder, outline the consequences of this action. (6 marks) d) Provide recommendations to ADG with respect to next steps including advice regarding the potential benefits and costs associated with activity based costing for ADG in minumum of 200 words and maximum of 250 words. (4 marks) Total 25 marks (6 marks) The management accountant has suggested a review of costing and pricing processes before a decision whether or not to discontinue the shredder is made. The overhead pool has been analyzed as follows: 250,500.00 160,500.00 Overheads relating to administration and requisitions* Building related overheads* Senior management and support function salaries Warranty costs Quality control costs Machine related costs (depreciation, insurance etc.) Set up costs 220,500.00 42,000.00 98,100.00 355,500.00 10,682.00 1,137,782.00 The following analysis has also been undertake with respect to potential cost drivers Data Products Rotavator Chainsaw Shredder Direct labour hours per unit 23 3 8 36 60 66 Total number of quality control inspections per product line (for total output) Material costs per unit 570.00 150.00 160.00 4 3 10 Machine hours per unit Warranty claims per year in relation to total output of each product Batch sizes for production runs 13 40 200 25 50 100 Due to the complexity of activity mapping it has been decided that all overhead * pools marked with above should be absorbed to products on the basis of direct labour hours for this exploratory exercise. b) Rework your calculations in a) but assuming that overheads are absorbed on the basis of activity based costing. (9 marks) c) Compare and contrast your answers to a) and b) and interpret the results in minimum of 200 words and maximum of 300 words. Provide advice to ADG with respect to the discontinuation of the Shredder, outline the consequences of this action. (6 marks) d) Provide recommendations to ADG with respect to next steps including advice regarding the potential benefits and costs associated with activity based costing for ADG in minumum of 200 words and maximum of 250 words. (4 marks) Total 25 marks