Case Study - 4 Reem Batteries and Power Appliances Co. LLC is one among the largest dry charged battery manufacturing companies in the Middle East. It produces two brands of batteries Gulf Star and Gulf Racer. The cost records of the company reveal the following information for the month April 2020: Gulf Star Gulf Racer 30,000 10,000 90 Product Output (in units) Selling Price per unit (in RO) Direct material @RO 6.50 per kg Direct Wages @ RO 5 per hour No. of quantity produced per batch Setup time per batch (Hours) 32.5 The Indirect costs for the month are as under: Factory Wages 137,600 Stores Receiving Costs 22,150 Set up costs 150,000 Material Handling Costs 318,000 Shipment costs 40,000 Inspection Costs 20,250 At present, the company absorbs the indirect costs based on consumption of material. The Management Accountant of the company, after making a rigorous analysis of the data, decided to shift from the absorption technique to Activity Based Costing technique and also to treat factory wages as direct cost. The Management accountant identified RO 80,000 for product Gulf Star and the balance for product Gulf Racer. The data relevant to activities and products are as follows: Activity Cost Pool Product Gulf Star Gulf Racer 70 30 4500 Cost driver Requisitions raised Orders Executed Number of Shipments No. of Inspections Setup hours Direct labour hours 3000 100 Stores Receiving Costs Material Handling Costs Shipment costs Inspection Costs Setup Costs Factory Wages 100 4500 2250 Required: a) The total cost and profits of both the products based on the absorption costing technique. (3 Marks) b) The total cost and profits of both the products assuming the indirect costs are absorbed based on activity based costing and also assuming factory wages as indirect cost. (4 Marks) c) The amount of cost distortion for each product and give your opinion on the decision of the Management Accountant. (50-100 words)