PART B For the last few years production based on a rate of $12 per direct labour hour. Since the company recruited a new management accountant, overhead is now allocated using activity based costing (ABC). For the coming year Purposeful Manufacturing budgeted for the following activities and activity costs: $20,000 for Machining $10,000 for Forklifting: $32,000 for equipment setup and $40,000 for quality inspections. The following budgeted information is also available: Purposeful Manufacturing had been allocating overhead to ts Direct Labour Hours for the year Number of machine hours for the year Number of forklift moves for the year Number of batches for the year Purposeful Manufacturing budgeted to produce 8,000 units of Product AA and expected to use 3,000 direct labour hours, 5000 machine hours, 120 moves and 500 batches to produce these units. The prime costs are budgeted at $16 per unit of Product AA. The manufacturing process undertaken at Purposeful Manufacturing begins with setting up equipment where each batch of products requires a different setup. This is followed by machining, where the cost of machining varies directly with the number of machine hours. Forklifts are used to move the work in progress around. Quality inspection is carried out for each batch of products. 8,500 direct labour hours 20,000 machine hours 500 moves 4,000 batches Required: 1) Calculate the cost per unit for Product AA using the company's approach to allocating overhead before ABC was implemented by the new management accountant. Show all calculations. 2) Calculate the cost per unit for Product AA using activity based costing. Show all calculations. 3) Outline three situations when activity based costing may be beneficial for a company to use. (2+5+3 10 marks)