a) Calculate manufacturing costs per unit for each product under a simple method using direct labour hours to base the Overhead rate.

b) Calculate manufacturing costs per unit for each product under Activity Based Costing.

c) Which method do you recommend and why? (Marks are allocated to show calculation to support your recommendation)

Please give the answer and detailed steps

CASE STUDY 2 90 MINUTES Singo Ltd manufactures two products, Basic and Deluxe model. Total budgeted manufacturing overhead costs are $551,250 and these are allocated between the two products based on direct labour hours. The following cost details are provided concerning the two products: Basic Deluxe Direct material cost per unit $4.50 $5.00 Direct labour cost per unit $9.00 $4.50 Direct labour hours 14,000 2,500 Units produced 35,000 10,000 Management believes that the current system (simple method) of using direct labour hours to apply overhead to production is inaccurate, and is interested in adopting an Activity Based Costing approach. Further analysis revealed that factory overhead is made up of five separate activities, as shown below: % of total Activity Activity overhead Allocation Cost pool Cost Driver costs Basic Deluxe Production set-ups 10% Number of production runs 51 101 30% Machine hours 7,500 5,000 Machining Materials purchasing 24% Number of purchase orders 20 50 spe 22% speo hours 3,500 3,850 Materials handling 14% Number of materials requisitions 30 60 100%