indigo Ltd is a small business with a turnover of less than $2,000,000 per year. It produces customised computer desks that move through several different processes. The company applies Activity Based Costing to better understand the flow of costs in the production process

The prices of direct costs are as follows:

• Timber costs $240 per metre

• Direct labour costs $18 per hour

For Job #1001, Indigo Ltd identified the following costs:

• Direct materials - timber - 50 metres

• Direct labour - 100 hours

For Job #1001, the following levels of activities were consumed:

• 4 set ups
• 200 pads were used
• 80 rooms were cleaned
• 1000 inspections were completed
• 2 cats were used

The following overhead costs and cost drivers are identified for the current period:

Activity	Cost driver	Cost	Activity level
Machine set up	Number of setups	200,000	50
Steel refining	Number of pads used	640,000	800
Cleaning	Number of rooms cleaned	200,000	1,000
Inspection	Number of inspections	260,000	13,000
Mouse trapping	Number of cats used	20,000	10

Required:

(a) Determine how much cost should be assigned to job #806 (10 marks)

(c) Identify activities that do not add value to the final product (5 marks)

(b) What could Indigo Ltd do to minimise its machine set up costs? (5 marks)