7 The Chemical Free Clean Co (C Co) is a large manufacturing company specialising in the manufacture of a wide range of environmentally-friendly cleaning products. However, two of the company's most competitive products on the market have been the dishwasher tablets and the laundry liquid products. The current basis for assigning manufacturing overhead costs has been direct labour hours. In 2018, the company has estimated that it will incur 50,500,000 in manufacturing overhead cost. Also, the company provided the following data for the two products: Product Laundry liquid Dishwasher tablets Sales in units 50,000 400,000 Sales price 650 475 Direct material & labour costs per unit 160 110 Manufacturing overhead costs per unit 440 250 Direct Labour-hours 80,000 20,000 Last year, the Chemical Free Clean Co (C Co) purchased an expensive robotics system to allow for a more extensive range of cleaning products in the Dishwasher tablets product line. Furthermore, the company's financial officer proposed that an activity-based costing (ABC) system could be valuable to evaluate a product mix and promotion strategies for the next sales campaign. She obtained the following ABC information for 2018: Activity Cost Driver Production Number of setups Estimated overhead cost 500,000 Total cost drivers 500 Cost driver for each product Dishwasher Laundry tablets 400 liquid 100 set-up Machine- Number of machine 45,000,000 600,000 300,000 300,000 related hours Packing Number of 5,000,000 250,000 50,000 200,000 shipments 50,500,000 Required: a) Using the current system to assign manufacturing support costs, what is the estimated total cost of manufacturing one unit for each product? What is the profit per unit for each product? (5 marks) b) Using the activity-based costing (ABC) data presented above, compute the cost driver rate for each overhead activity. compute the revised manufacturing overhead cost per unit for each product. compute the revised total cost to manufacture one unit of each product. (8 marks) [Question 7 continues on the next page] c) By comparing the solutions between (a) and (b) above, explain any differences in the unit costs reported under the two approaches. d) Discuss advantages of using an Activity-based costing (ABC) system. (5 marks) (7 marks) (Total: 25 marks)