A company manufactures three products and uses a traditional absorption costing system based on total expected machine hours. The company is operating at full capacity and can sell all units produced. Data for the current year is as follows: Product A Product B Product C Selling price per unit $ 100.00 $ 150.00 $ 225.00 Direct labour per unit S 20.00 $ 26.00 $ 60.00 Direct material per unit 20.00 $ 35.00 $ 60.00 Direct labour hours per unit 1.50 2.00 3.00 Machine hours per unit 2.00 4.00 3.00 Expected annual production (units) 10,000 8,000 6.000 Expected manufacturing overhead $1,400,000 The company president is also interested in Activity-Based Costing and the following data has been compiled to assign manufacturing overhead via activity cost pools: Total 49,000 Cost Activity Expected Overhead Costs Expected Activity Level Pool Measure Costs Product A Product B Product C $280.000 Direct labour support DL hours 15.000 16.000 18.000 $560,000 20,000 Machining & finishing Machine hours 32,000 18.000 $350.000 50 35 Production line setups No. of setups 15 $70,000 1 No. of products 1 1 Product sustaining n/a $140.000 n/a n/a Other n/a 70,000 100 3 n/a Required: 10 pilluent is also interested in Activity-Based Costing and the following data has been compiled to assign manufacturing overhead via activity cost pools: Total Cost Activity Expected Overhead Costs Expected Activity Level Pool Measure Costs Product A Product B Product C Direct labour support DL hours $280,000 15.000 16,000 18,000 Machining & finishing Machine hours $560,000 20,000 32,000 18,000 Production line setups No. of setups $350,000 50 35 15 Product sustaining No. of products $70,000 1 1 1 Other n/a $140,000 n/a n/a 49,000 70,000 100 3 n/a n/a Required: 1. Calculate the total product margin for Product A under absorption costing. (6 marks) 2. Calculate the total product margin for Product A under activity-based costing. (6 marks) 3. Explain the difference in the product margin between the two systems. (3 marks) Paragraph = iii