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May 2021 nngemenl A mounting 7 0f 7 Page 6 of? Approved Question Five Viola & Drum Ltd produces affordable musical instruments for schools. Aneena Frost, the chief accountant, is reviewing the company's current approach to allocate overheads to products Currently the company absorbs overheads based on direct labour hours. Aneena feels that the company should switch to activity-based costing (ABC), as the product lines make different demands on the company' s overhead resources in particular, their violin model \"Stradicrazy\" requires a lot of advance preparation. The following information about their two main product models is available to assist in your calculations: StradiCrazy DrumOn (DO) SC 74 500 Driven b labour hours 17 145 Driven b number of units 60 000 Driven b number of kilos Direct labour is charged as 9 per labour hour. Em -lo ee-related Material movements Required: a) Calculate the total prot or loss for StradiCrazy and DrumOn using traditional costing. (9 marks) b) Calculate the total profit or loss StradiCrazy and DrumOn using ABC costing. Clearly show your workings. (12 marks) c) Explain the results. Consider in addition whether the introduction of ABC would make sense for the company, and why? (4 marks) Total: 25 marks May 202l Introduction to Management Accounting ACCOi'mW Page 7 of 7