ABC Company deals in manufacturing of four products A, B, C & D.Company has been using traditional costing system to absorb overheads on the basis of labour hours. Newly appointed Finance Manager has suggested to use the activity-based costing mechanism for allocation of overheads.

Information for the products for the current period is as follows:

Product A Product B Product C Product D

• Production and Sales 20,000 15,000 30,000 35,000
• Selling Price Per Unit 100 50 80 75
• Material 35 12 25 20
• Labour @5 per Hr 20 10 15 20
• Machine Hours per unit 1 1 2 2
• # of Production runs 20 25 20 15
• # of Purchase orders 5 10 20 15
• # of Deliveries 50 40 60 50

The annual overhead costs are as follows:

Machine Set up costs 640,000

Machine Running cost 825,000

Labour Management 850,000

Procurement costs 300,000

Delivery Cost 260,000

Requirement:

a)Calculate the full cost of each product A, B & C using absorption costing.

b)Calculate the full cost of each product A, B & C using Activity Based Costing system.