1. ABC versus Traditional Costing

Dodo Co. manufactures three products, A, B & C. Data for the period just ended is as follows:

	A	B	C
Output (units)	20000	25000	2000
Sales price	$20	$20	$20
Direct material	$5	$10	$10
Direct Labour Hours per unit	2 hrs.	1 hr.	1 hr.
Direct Labour Wages @ $5 /hour)	$10	$5	$5

The following data on overhead costs incurred is now available:

Activities		$
Machining		55000
Quality control & set ups		90000
Receiving		30000
Packing		15000
Total		190000
Actual activities as per product.
Product	A		B		C
Output (units)	20000		25000		2000
Cost driver data:
Labour hours/unit	2		1		1
Machine hours/unit	2		2		2
No. of production runs	10		13		2
No. of components receipts	10		10		2
No. of customer orders	20		20		20

1. Using traditional absorption costing (using direct labour hours to apportion O/H), calculate the full production cost per unit and the profit per unit for each product.
2. Using Activity Based Costing, calculate the full production cost and the profit per unit of each product.

Explain briefly how activity based costing may help OSCC management make better business decision(s).