(a) Calculate the cost of each product using ABC

QUESTION 6: (25 MARKS) Eagle Manufacturing Lid produces a range of products at seven separate sites. Each site produces a maximum of four products. The directors have decided to introduce Activity Based Costing (ABC) and have asked each site manager to obtain and analyse the relevant data for their site. Product costs are currently calculated using absorption costing, with overheads being absorbed on a machine hour basis. As part of the process of introducing ABC, the directors wish to assess the profitability of individual products, with the possibility that the product range may be reduced. You are the Manager of the Barnley site and you have obtained the following data: Product A B C Rs Rs RS Selling price per unit 300 530 435 Direct material per unit 55 67 98 Direct labour per unit 41 54 57 Overheads per unit 117-20 293 117-20 Total cost per unit 213-20 414 272-20 Budgeted production volume 600 units 400 units 200 units Machine hours per unit 0-6 1-5 0.6 Production runs in period 32 40 25 Number of sales orders 19 15 Number of deliveries of material 16 The budgeted overheads of the site for the period are: Machine running costs Rs 78,560 Set up costs Rs 82,900 Material handling costs Rs 49,500 Machine hours are limited to 1,140 hours per period. REQUIRED: (a) Calculate the cost of each product using ABC. (12 marks)