A company manufactures two products, Land M, using the same equipment and similar processes. An extract of the production data for these products in one period is shown below.

L M Quality produced (units) 5 000 7 000 Direct labour hours per unit 1 2 Machine hours per units 3 1 Set-up in the period 10 40 Orders handled in the period 15 60

Overhead costs

Relating to machine activity 220 000 Relating to production run set-ups 20 000 Relating to handling of orders 45 000

285 000

A. Calculate the production overheads to be absorbed per unit of each product based on an ABC approach using suitable cost drivers. (12 marks)

B. Outline the four stages of the ABC process (4 marks)

C. State Two advantages and two disadvantages of the ABC System (4 marks)