Alenda Ltd manufacture two types of phone handsets $,$A$01$ and D$01,$ and sellsthese phones in Africa.Due to increased demand, Alendar Ltd decided to invest heavily in new manufacturing technology which led to a reduction in its labour force.

Histocally, Alender Ltd absorbs all its fixed costs on the basis of machine hours using a predermined rate.Currently,Alendar Ltd determines its prices by adding $20\%$ markup to he total cost of the products.The Management Accountant is concerned about the selling prices derived under the traditional absorption costing basis. He thinks that phones are either under$-$priced or overpriced on this basis.Consequently,he has recommended to the board of Alendar Ltd to move to the Activity Based Costing $($ABC$)$ system.Some members of the bord were not very comfortable on this proposal and requested for a though explanation of the ABC system.

The following financial and operating data for $2021$ is available:

Phone A$01$ Phone D$01$ Total

Variable cost per unit$($K$)1,4501,254$

Total costs $($K$)42,387,120$

Budgeted production units $7,96810,160$

Machine hours per unit $1\mathrm{.}5$ hrs $1\mathrm{.}8$ hrs

An ABC study by the Management Accountant revealed that the fixed overheads are driven by factors other than machine hours.The result of the study is tabulated below:

Activity cost pool Fixed overheads Cost driver

$(\%$ alloocation$)$

Setup cost $70\%$ Number of setups

Stores handling costs $20\%$ Number of material handling

Customer invoicing costs $10\%$ Number of customer orders

The study also revealed the following activity volumes for each of the phones for the year $2021.$

Type of Numberof setups Numberof machine Number of

phone Handlings Orders

A$011,5003,1003,930$

D$011,0003,10011,790$

Calculate :

The total absorption cost plus basis.

The activity based costing plus basis.

Evaluate the results of the calculated prices $.$