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ACE Ltd has a single production process for which the following costs have been estimated for the period ending 31 December 2020: Material receipt and

ACE Ltd has a single production process for which the following costs have been estimated for the period ending 31 December 2020:

Material receipt and inspection cost 31,200
Power cost 39,000
Material handling cost 27,300

Three products X, Y and Z are produced by workers who perform a number of operations on material blanks using hand-held electrically powered drills. The workers have a wage rate of 7.50 per hour.

The following budgeted information has been obtained for the period ending 31 December 2020:

Product X Product Y Product Z
Production quantity (units) 4,000 3,000 1,600
Batches of material 20 10 32
Data per product unit:
Direct material (sq metres) 8 12 6
Direct material () 10 6 12
Direct labour (Minutes) 24 40 60
Number of power drill operations 12 6 4

Overhead costs for material receipt and inspection, process power and material handling are presently each absorbed by product units using rates per direct labour hour.

An activity based costing investigation has revealed that the cost drivers for the overhead costs are as follows:

Material receipt and inspection: number of batches of material

Process power: number of power drill operations

Material handling: quantity of materials (sq metres) handled

Required: Prepare a summary which shows the budgeted product cost per unit for each of products X, Y and Z for the period ending 31 December 2020 detailing the unit costs for each cost element: (i) using the existing method for the absorption of overhead costs and (ii) using activity based costing

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