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Problems 1. Vintage Leatherworks Pty Ltd manufactures two types of leather goods - Standard and Deluxe. The company is currently using a traditional costing system
Problems 1. Vintage Leatherworks Pty Ltd manufactures two types of leather goods - Standard and Deluxe. The company is currently using a traditional costing system with machine hours as the cost driver. The company is considering whether to use the activity-based costing (ABC) method to allocate overhead costs to products. Budgeted overhead costs of the upcoming accounting period follow: Total budgetedActivity driver activity cost Budgeted level for activitv driver Activity Materials handling$40 000 $45 000 S110 000 Number of material 500 moves moves Number of machine hours Number of setups200 setups Machine 10 000 hours Setup Budgeted information about the two products follows: Standard Deluxe Number of material moves Number of setups Total machine hours Units completed Direct material cost per unit Direct labour cost per unit 250 50 5000 2500 $25 $30 400 90 4000 2000 $35 $60 Required: a) Calculate the unit cost of each product if the conventional costing approach is used b) Determine the unit cost of producing each product if activity based costing is used
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