Q5 A company produces three products, X, Y and Z. The following data is given Product X Y Z Per unit Direct material cost Direct labour cost Direct labour hours Machine hours In period: Units produced Production runs Customer deliveries Machine related Material related Set up related Despatch related Total overhead cost 30 ACTIVITY 1.5 2.0 Machine related Material related Set up related Despatch related 30,000 10 20 25 12 2.0 3.0 The overhead cost of 2,470,000 in the period is analysed to activity cost pools as follows: ACTIVITY COST POOL 20,000 6 30 1,050,000 486,000 240,000 694,000 2,470,000 22 6 1.0 3.0 A system of activity based costing is to be introduced for product costing to replace the old metho of overhead absorption, which is based on direct labour hours. The following cost drivers have been identified for each activity: COST DRIVER 10,000 24 50 Machine hours Direct material cost Number of production runs Number of customer deliveries You are required to: 1. Calculate the cost per unit of each of the three products based on the old method of absorption, i.e. direct labour hours. 2. Calculate the cost per unit of each of the three products using an activity based costing approach.

Q5 A company produces three products, X,Y and Z. The following data is aiven The overhead cost of 2,470,000 in the period is analysed to activity cost pools as follows: ACTIVITY COST POOL A system of activity based costing is to be introduced for product costing to replace the old methe of overhead absorption, which is based on direct labour hours. The following cost drivers have been identified for each activity: You are required to: 1. Calculate the cost per unit of each of the three products based on the old method of absorption, i.e. direct labour hours. 2. Calculate the cost per unit of each of the three products using an activity based costing approach