Advanced Toys Ltd manufactures and sells three models of digital toy games for children.

Details of unit costs, prices and profitability of each product under the current traditional costing

svsten are provided below

Direct materials

Direct labour

Manufacturing overhead

Product cost per unit

Premium

$ 22.50

15.00

60.00

97.50

Advanced

$ 15.00

12.00

48.00

75.00

Basic

7.50

00

32.00

47.50

Selling price per unit

180.00

150.00

110.00

The direct labour wage rate is $20 per hour. The company uses direct labour hours as a basis for absorption of manufacturing overhead

The newly installed activity-based costing system provides the following data on the overhead

costs and the sales units

I

Premium

5,000

Activities

Engineering (Engineer hours)

Quality control (Inspection hours)

Machinery (Machine hours)

Materials handling (DM costs)

Total

Sales units

Total overhead

$ 840.000

951.000

544.000

525.000

$2.860,000

Advanced

20.000

Basic

50.000

Activity level

900 hrs

375 hrs

225 hrs

5.000 hrs

10,000 hrs

15,000 hrs

640 hrs

2.100 hrs

2,700 hrs

$112,500

$300,000

$375.000

Note: Material handling overheads vary with the direct materials costs.

Required:

(a) Using the activity-based costing system, calculate the cost driver rates for each activity ANC

proguct cost per unit tor the three product models

(13 marks)

(b) Calculate the gross profit per unit for the three product models and advise which model is most profitable under each of the following costing systems:

(i) traditional costing

hun activity-based co