Chumi Ltd. designs and manufactures jewellery for the Irish and international market. Currently the company uses a traditional costing system to allocate production overheads to products based on direct labour hours. The production manager has suggested to you that an activity based costing approach would give a better allocation of production overheads and has asked you to carry out some calculations. You have collected the following information on the three product lines produced by Chumi Ltd: Bracelet 1,000 Necklace 2,000 50 Earrings 1,000 20 20 40 30 100 Units produced No of Sales Orders No. of Material Orders No. of Requisitions No. of Production Runs Machine hours per unit Direct labour hours per unit Direct Labour Cost per hour Direct Materials per unit 70 36 40 1.2 20 30 20 Production Overheads Set Up Costs Cost of Ordering Materials Cost of Handling Materials Utility Costs Packaging Costs 109,000 81,000 35,000 175,000 32,000 You have identified the following cost drivers for each of the overhead cost pools: Cost Pool Cost Drivers Set Up Costs No. of Production Runs Cost of Ordering Materials No. of Material Orders Cost of Handling Materials No. of Requisitions Utility Costs Machine hours Packaging Costs No of sales orders Chumi Ltd applies a 120% mark-up on production cost to each of the three product lines. Requirement A. Calculate the overhead absorption rate per labour hour using the traditional costing system. (1 mark) B. Calculate the production overhead charged to Bracelets per unit using the traditional pre- determined overhead absorption rate. (2 marks) C. Calculate the production overhead charged to Necklaces using the traditional pre- determined overhead absorption rate. (2 marks) D. Calculate the production overhead charged to Earrings per unit using the traditional pre- determined overhead absorption rate. (2 marks) E. Using activity based costing calculate the cost driver rate for set-ups. (1 mark) F. Using activity based costing calculate the cost driver rate for ordering materials. (1 mark) G. Using activity based costing calculate the cost driver rate for handling of materials. (1 mark) H. Using activity based costing calculate the cost driver rate for packaging. (1 mark) I. Using activity based costing calculate the total production overhead cost charged to Bracelets (2 marks) J. Using activity based costing calculate the total production overhead charged to necklaces. (2 marks) K. Using activity based costing calculate the total production overheads charged to earrings. (2 marks) L. Using activity based costing calculate the total production cost for bracelets. (3 marks) A M. Using activity based costing calculate the total production cost for necklaces. (3 marks) N. Using activity based costing calculate the total production cost for earrings. (2 marks)