Island Craze Publishing Ltd publishes and sells only two types of books. The first one is the Aristo. This book uses the best qua

of paper and has a high demand. It is therefore manufactured in only eight large production runs. For this book, the firm is subje

to various inspections from government departments and it undergoes various quality assurance checks.

Production of the second book, the Brute, is completed in monthly runs, that is$,$ twelve times a year. Unlike the Aristo, the Brute

uses cheaper paper. It is also subject to fewer quality assurance checks and no monitoring from the government. Also, the

production of Aristo requires far less machine hours than the Brute.

The firm had always been adopting traditional methods for the absorption of overheads and absorption costing based on mact

hours is normally applied for computation of overheads. However, given the rising competition in the book selling industry, the

senior management has now become more concerned about cost cutting and increasing competitiveness. Since Activity Base

Costing $($ ABC $)$ for the absorption of overheads is becoming more and more popular, the management of the firm are considerir

whether the adoption of the ABC system would bring better results.

The following cost and revenue information is available for the two books:

Aristo uses the better quality paper which costs Rs $4$ per $kg$ while for the Brute the cheaper quality paper costs half this

amount. Each Brute book requires $200g$ of paper while, given the higher demand and higher production, each Aristo book

requires four times this quantity of paper.

The cost for printing ink amounts to Rs$60$ per litre. The Aristo requires only $100ml$ of printing ink while the Brute, requires thr

this quantity.

As regards machining time, the Aristo requires $12$ minutes per book. Since the Brute is larger, it requires a total of $20$ minutes

per book. Running costs of machines, per hour, amount to Rs$24.$

The Aristo is normally sold at Rs $18\mathrm{.}60$ while a Brute costs Rs$28.$

The following data is available for the three main overheads:

A total of $360$ inspections will be required for the Aristo, while the Brute will be subject to inspections only $40$ times. An annual

production of $2,000,000$ units is expected for the Aristo, to be completed in only $8$ large production runs, whereas the twelve

production runs for the Brute are expected to result in an approximate $20,000$ units monthly.

$($a$)$ Using traditional absorption costing method, calculate the cost and profit per unit for the Aristo and the Brute $.$

$($b$)$ Using the Activity Based Costing $($ABC$)$ system, find the cost and profit per unit for each book