ABC QUESTION: Owl Ltd This company has a subsidiary called Birdy Limited and is worried about the costing process Birdy Ltd makes two products, Feathers and Claws. It currently recovers overheads using a rate per direct labour hour. Information relating to each of these products is set out below. Claws 91 18,000 units 800 5 hours Feathers Selling price per unit 52 Annual sales volume 15,000 units Number of sales invoices issued each year 200 Labour time per unit 2 hours Labour rate per hour 10 Material cost per unit Size of each production batch 750 Bought-in parts per unit Machine set-ups per batch 10 25 30 1,000 MAD Sem 7 ABC QUESTION: Owl Ltd The Finance Director of Birdy Ltd has recently produced the following analysis of overheads and their relevant cost drivers. Type of overhead Bought-in parts handling costs Materials handling costs Sales invoicing costs Machine set-up costs All other overheads Total overhead costs Cost driver Number of bought-in parts Number of production batches Number of invoices issued Number of machine set-ups Labour hours 96,000 38,000 20,000 26,000 60,000 240.000 Required: (a) Calculate the total cost per unit and profit per unit for each product using: (1) The traditional full cost method of overhead absorption. (2) The activity-based costing method. (b) Comment on your findings. MAD Sem 7