Liverpool Ltd produces two types of exclusive business bags for men, standard and executive. The company is currently using simple costing systems that have two direct costs categories (material and labour) and one indirect cost pool. The simple costing systems use total budgeted direct labour hours of 8,850 to allocate its indirect costs. Due to increase of the competition in the market, the management consider to change its cost systems from simple to ABC costing. The production information for the most recent year is as follow: Units produced and sold Selling price Direct materials costs per unit bag Direct manufacturing labour cost per hour Direct manufacturing labour hours per unit bag Direct manufacturing labour cost per unit Standard 3,200 $125 $30 $20 1.5 hours $30 Executive 1,800 $200 $45 $20 2.25 hours $45 After analysing its indirect costs pools, the company found five activities that generate the indirect costs: Production scheduling, materials handling, Machine set-up, Assembly and Inspection. The company has completed a research on its indirect cost activities and provides the following: Activity Activity Cost Activity-cost driver Total 125 Production scheduling Materials handling Machine set-up Assembly Inspection 240 Activity Usage Standard Executive 40 85 72 168 45 155 4,500 5,500 150 312 $95,000 production runs $42,000 Material moves $20,000 Machine set-ups $50,000 Machine hours $23,100 Number of inspections $230,100 200 10 000 462 (20 marks) Required (show your workings and round it to the nearest two decimal places): (a) Using the simple costing system, calculate the product cost per unit for Standard and Executive bags. Using Activity Based Costing System, calculate the product cost per unit for Standard and Executive bags. (c) Compare the cost of Standard and Executive bag using the simple and ABC systems and explain why the product costs differ between the two systems for both products. (30 marks) (10 marks)