Khensen Ltd has the following data in relation to the production of their best-selling machinery code named CAD15. The company expects to spend 1,250 on direct material costs and 4,320 on direct labour costs.

The following budget details relate to the month of December 2020.

1. Four cost pools have been identified:

Product design

Machine set-up

Materials handling

Inspection

2. The cost drivers identified with each cost pool are

Total number of parts/volume

Number of machine set-up hours

Number of material requisitions

Number of completed units

3. Budgeted costs and activities for the month:

Cost pool	Overhead cost	Activity	Quantity
Product design	48,000	Number of parts/volume	1,200
Machine set-up	12,250	Number of machine set-up hours	490
Materials handling	55,000	Number of material requisitions	5,000
Inspection	9,555	Number of completed units	2,450
Total	124,805	Direct labour hours	26,000

CAD15 will require 360 direct labour hours; 10 parts/volume; 20 machine setups; 19 material requisitions and will contain 125 completed units.

Direct labour costs 12 per hour.

Required:

a) Calculate the overheads absorption rate and the total overheads to be absorbed.

(3 marks)

b) Calculate the total production cost under Absorption Costing.

(5 marks)

c) Calculate the cost per each activity.

(4 marks)

d) Calculate the total cost of each cost pool.

(5 marks)

e) Calculate the total production cost under Activity Based Costing.

(5 marks)

f) Identify and explain 2 benefits and 2 limitations each of ABC.

(150 word maximum)