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 system are provided below: Premium Advanced Basic Direct materials $ 22.50 $ 15.00 $ 7.50 Direct labour 15.00 12.00 8.00 Manufacturing overhead 60.00 48.00 32.00 Product cost per unit 97.50 75.00 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. a The newly installed activity-based costing system provides the following data on the overhead costs and the sales units: Basic Sales units 50.000 Activities Total overhead Engineering (Engineering hours) S 840,000 Quality control (Inspection hours) 951,000 Machinery (Machine hours) 544,000 Materials handling (DM costs) 525.000 Total 52.860.000 Premium Advanced 5.000 20.000 Activity level 900 hrs 375 hrs 5,000 hrs 10,000 hrs 640 hrs 2.100 hrs S112,500 S300,000 225 hrs 15,000 hrs 2,700 hrs $375,000 Basic 50.000 Sales units Activities Engineering (Engineering hours) Quality control (Inspection hours) Machinery (Machine hours) Materials handling (DM costs) Total Total overhead $ 840,000 951,000 544,000 525,000 $2.860,000 Premium Advanced 5.000 20.000 Activity level 900 hrs 375 hrs 5,000 hrs 10,000 hrs 640 hrs 2,100 hrs $112,500 $300,000 225 hrs 15,000 hrs 2,700 hrs $375,000 Note: Material handling overheads vary with the direct materials costs. 01-a (a) Using the activity-based costing system, calculate the cost driver rates for each activity AND product cost per unit for the three product models (13 marks) H. E. Bi A. X, X 2 66 X (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: c) traditional costing (1) activity-based costing (7 marks)