Another item produced inhouse are the bedside lamps. The bedside lamps are available in $3$

different sizes and are produced using mostly the same production methods and equipment

Product Further processing

costs per m$^2$

for each size. The company uses the traditional costing method at present to cost the bedside

lamps. The following budgeted information is applicable for the $3$ sizes of bedside lamps for the

financial year ending $31$ December $2023.$

Product $$

bedside lamps

Labor time per

unit

Machine time

per unit

Material cost

per unit $($R$)$

Volume $($units$)$

Large $60$ minutes $180$ minutes $5001500$

Medium $60$ minutes $60$ minutes $2402250$

Small $30$ minutes $90$ minutes $40012300$

The direct labor cost is R$40$ per hour. Manufacturing overhead costs are allocated to the

products at present on the basis of machine hours. The allocation rate presently used is R$30$

per machine hour. The division$$s cost accountant, Josie Potter, has recently attended a short

course on costing methods and is considering implementing an activity$$based costing system

$($ABC$).$ At a recent management meeting, on the topic of moving from the traditional costing

system to the activity$-$based costing system, Josie stated: $$We$$ve got to make better pricing

decisions and we can only do that using a more accurate method like ABC to allocate

overhead costs$.$ After some investigation, she has collected the following information:

$$ Manufacturing overheads are driven by five activities, namely: Set up costs $(25\%),$ machinery

costs $(20\%),$ material handling costs $(15\%),$ inspection costs $(30\%)$ and maintenance costs

$(10\%).$

$$ The following budgeted activity volumes are associated with the product line for the financial

year ending $31$ December $2023$: