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Mail Co produces two kinds of envelopes called the Basic and the Deluxe. The Deluxe uses more expensive materials than the Basic. Mail Co currently
Mail Co produces two kinds of envelopes called the Basic and the Deluxe. The Deluxe uses more expensive materials than the Basic. Mail Co currently uses traditional absorption costing to allocate overheads to its products using production units as the basis for apportionment. Information for the two products is as follows: Selling price is calculated using a percentage mark-up on cost. Mail Co is now considering the introduction of an activity-hhised costing (ABC) system. Budgeted annual overheads are as follows: The trainee accountant for Mail Co has produced the following analysis: Based on the above analysis and the information for the two products, which of the following statements is/are true? (1) The costs per unit differ under the two costing techniques because the Deluxe takes more processing time (2) The Deluxe cost per unit is higher using activity-based costing than it is when using absorption costing because it uses more expensive materials (3) The cost per unit of the Basic under activity-based costing shows that the current selling price of the Basic is understated 1,2 and 3 1 and 2 only 1 only 2 and 3 only
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