Distinguish between Traditional costing method and Activity Based Costing. (5 marks) The following information is presented for Books Ltd for the forthcoming period: Products Production & Sales Quantity Selling price per unit Leading cost per unit 4 Machine Department (machine hours per unit) 6 Cost Pool Assembly Department (direct labour hour per unit) 6 Machining services Assembly services Cost pools for the overheads can be determined as: Set-up costs Order processing A 50,000 Procurement costs P65 P52 Products No. of set-ups Client orders Purchase orders Over heads allocated and apportioned to production departments (including service cost centre costs) were to be recovered in product cost as follows: Machine department at 0.90 per machine hour Assembly department at 0.60 per direct labour hour. P 415,000 320,000 (10 marks) b) Activity based costing (15 marks) 45,000 230,000 B 80,000 85,000 P100 P85 A 210 7,000 4,000 Required: Prepare the profit statement using: a) Traditional absorption costing 3 Cost Driver Machine hours The following estimates are available for the period: Direct labour hours Set-ups Client orders Purchase orders B 190 5,500 5,600 C 100,000 P80 P70 7 LO 5 Period quantity 790,000 800,000 1,500 66,000 20,000 C 320 19,000 7,000