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(b) Harmon Ltd manufactures two types of calculators Mathematical and Financial. The company is currently using a traditional costing system with machine hours as the
(b) Harmon Ltd manufactures two types of calculators Mathematical and Financial. The company is currently using a traditional costing system with machine hours as the cost driver. The company is considering whether to use the activitybased costing (ABC) method to allocate overhead costs to products. Budgeted overhead costs of the upcoming accounting period follow: Activity Total Activity driver Budgeted level for budgeted activity driver activi cost $375,000 Number of machine hours 75,000 machine hours $120,000 Number of production runs 100 production runs $105,000 Number of inspection hours 1,500 inspection hours Budgeted information about the two products is as follows: Mathematical Financial Annual production in units 50,000 100,000 Direct material costs $150,000 $300,000 Direct labour costs $50,000 $100,000 Direct labour hours 2,500 5,000 Machine hours 25,000 50,000 Number of production runs 50 50 Inspection hours 1,000 500 Required: (i) Calculate the unit cost of each product if the conventional costing approach is used. (2 marks)
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