Geo Ltd manufactures three different products: Alpha, Beta and Ceta. The selling prices are determined based on a pricing policy of 'cost plus a mark-up of 10%'.The company incurred total manufacturing overheads of $748,800, which are currently allocated on a plant-wide basis using direct labour hours as the absorption base.The financial controller is planning the implementation of an Activity Based Costing (ABC) system and has recently identified various cost drivers and assigned costs to related activity cost pools as follows:

Question 1 (16 marks) Geo Ltd manufactures three different products: Alpha, Beta and Ceta. The selling prices are determined based on a pricing policy of 'cost plus a markup of 10%'. The company incurred total manufacturing overheads of $748,800, which are currently allocated on a plantwide basis using direct labour hours as the absorption base. The financial controller is planning the implementation of an Activity Based Costing (ABC) system and has recently identied various cost drivers and assigned costs to related activity cost pools as follows: Activigg Cost Driver Cost Pool Material Inspections Material Quantity $320,000 Machine Maintenance Machine Hours $316,800 Production Scheduling Production Set-ups $112,000 The following operating statistics and information concerning the three products are available: Products Alpha Beta Ceta Production (Units) 5,000 8,000 7,500 Direct Materials Used $35,000 $31,000 $41,000 Direct Labour Wages $29,000 $33,000 $31,000 Machine Hours 24,000 8,000 16,000 Production Setups 105 305 215 Raw Materials (Quantity) 400,000 240,000 640,000 Labour Hours 32,000 16,000 48,000 Required: (a) Using the traditional approach of allocating overheads to products, calculate the product cost per unit for each of the three products. (7 marks) (b) Using the principles of Activity Based Costing, calculate the product cost per unit for each of the three products. (9 marks)