Kiwi Ltdmanufactures three types ofequipment X, Y and ZThe company has been experiencing steady declines in its profitability in recent times. Kiwi Ltd currently uses conventional product costing system whereby overhead costs are allocated on the basis of direct labour hours.The direct labour hours are estimated to be 50,000 hours.The Direct material and Direct Labour costs per unitfor the three products are as below:

X Y Z

Direct Material$360$500$600

Direct Labour $50$200$100

The management suspects that conventional product costing system used may have contributed to the profit declines. Therefore , the CFO implemented an alternative system namely,activity-based product costing system. Given below are each activity, its cost and its related activity driver.

Activity Cost Activity Driver

Material handling $ 2,600,000 Number of parts

Machining $ 1,500,000 Machine hours

Cutting $ 400,000 Labour hours

Total manufacturing cost $ 4,500,000

The following information pertains to each product line of Kiwi Ltd for the year:

X Y Z

Units to be produced 10000 5000 20,000

Machine hours per unit 5 3 0.5

Parts per unit 2 5 1

Labour hours per unit 1 4 1

1) Calculate the predetermined overhead rate based on Direct labour hours

2)Calculate thecost per unitunder conventional product costing system?

Product X

Product Y

Product Z

3)Determine thetotal overhead allocatedto each of the three products (4.5 marks)Please only enter numberdo not use dollar sign or decimal point.

X Y Z

Material handlingAnswer

MachiningAnswer

Cutting

4) Determine thetotal cost per unitof producing each product if activity based costing were to be used

Product X

Product Y

Product Z