A manufacturing company, based in Birmingham, makes auto parts for the motor industry. A division of the company makes two engine components, X and Y. Relevant information on the next budget period for these two components are given below:

product parts	X	Y
output in units	13,000	15,000
cost per unit:
direct material	45	55
direct labour	30	25
total machine hours	2,500	2,300
number of production runs	65	75
orders excueted	135	145
number of shipments	40	35

The two components are similar and are usually produced in production runs of 200 units. The production overhead is currently absorbed by using a machine hour rate, and the total of the production overhead for the period has been analysed as follows:

overhead	budgeted cost	cost driver
machine department cost	360,000	machine hours
set up cost	99,400	number of production runs
inspection	25,900	number of production runs
material handling	156,800	orders executed
delivery	26,250	number of shipments
	668,350

Required:

(a) Using the Activity Based Cost information, compare the overhead cost per unit in and the percentages of overhead costs for the two parts, X and Y.

(b) Using the number of units to assign overhead costs to the parts, X and Y, (a traditional approach) compare the overhead cost per unit in s and the percentages of overhead costs allocated for the two parts.

(c) Using the data available, explain the differences between the unit overhead costs in percentages between (a) and (b) above.

(d) Discuss the advantages and disadvantages of organisational decentralisation.