Exercise 1 - Full Costing traditional and ABC (30 min prep / 20 minutes correction) Arya Ltd produces two types of product, Alpha and Beta, and sells them in a very competitive market. Currently they are applying Absorption costing system in order to calculate the overhead rates but according to the recent reports, their market share has declined. The reason is using distorting information in determining prices. Therefore, they are advised to switch to Activity Based Costing. The information relating to the two products is given below: Alpha Beta 200 Units per batch Number of orders per unit Number of receipts Number of assemblies Number of tests per batch Number of batches Direct Labor Hour per unit 2w3 40 70 12 10 240 1 35 55 5 8 1 The direct material cost for each unit of Alpha and Beta is 75.00 and 25.00 respectively. The company uses direct labor hours as allocation base for absorption costing. Each labor hour costs 18.00 per hour. The information relating to factory overhead costs is given below: Activity Cost Driver Total cost (0) Production Ordering Number of Orders 34 000 Material receiving Number of Receipts 54000 Relay assembly Number of assemblies 80 000 Template etching Number of batches 10 000 Quality control Number of tests 64 000 242 000 1. Calculate the production cost per unit of Alpha and Beta, using absorption costing 2. Calculate the overhead cost per one unit of Alpha and Beta, using ABC