Housing Ltd manufactures a range of products used in the building industry. Manufacturing undertaken using one of two processes: the A Process and the B Process. All of the products are manufactured in batches. The current pricing policy has been to absorb all overheads using direct labour hours to obtain total cost. Price is then calculated as total cost plus a 35 per cent mark-up A recent detailed analysis has examined overhead cost; the results are A Process cost BProcess cost Set-up cost Handling charges Other overheads Total overhead costs Analysis of overhead costs Cost per month (E) Monthly volume (K) 96,000 480 hours 44.3800 1.280 hours 42.900 260 set-ups 45,600 380 movements 50,700 280,000 There are 4,000 direct labour hours available each month. Two of Housing Ltd products are (Product 1) and (Product 2). Product 1 is produced by the & Process in a simple operation. Product B is manufactured by the B Process, a more complex operation with more production stages. Both products are sold by the metre. Details of the two products are Monthly volume Batch size Processing time per batch -A Process B Process Product 1 Product 2 1,000 metres 500 metres 1,000 metres 50 metres 100 hours 25 hours 2 2 Set-ups per batch Handling charges per batch Materials per metre Direct labour permetre Direct labour is paid at 16 per hours. 1 movement Smovements 513 16 hour hour Required: i. Calculate the price per metre for both Product 1 and Product 2 detailed above, using traditional absorption costing based on direct labour hours. (35 marks) i. Calculate the price per metre for both Product 1 and Product 2 using activity-based costing. Assume that 'Other overheads' are allocated using direct labour hours. (50 marks) iii. Outline the points that you would raise with the management of Housing Ltd in the light of your answers to (a) and (b). Provide five valid reasons and justify them (Maximum five valid points and 250 words. Each point will be awarded 3 marks) (25 marks) Total 100 marks