Jazz Ltd produces two products X and Y. The enterprise produces both products with the

same equipment. Details of the cost activities are as follows:

Overhead cost:

Rand

Material handling 200 000

Material procurement 25 000

Set-up cost 120 000

Quality control 200 000

Production 700000

Total 1245 000

Cost driver analysis

Type of overhead (Type of cost driver)X Y Total

Material handling (material movements) 150 100 250

Material procurement (number of orders) 220 110 330

Set-ups (number of set-ups) 40 60 100

Quality control (number of inspections) 100 130 230

Production (Direct labour hours) 30 000 20 000 50000

Annual output

Product X 100 000 units

Product Y 12 000 units

Required:

Calculate the overhead cost per product (per unit) using:

a.A traditional absorption costing system using labour hours for application'

b. An activity base costing system