Question 1 (30 Marks) Harambee Ltd makes three main products, using broadly the same production methods and equipment for all the three products. A conventional product costing system is used at present although activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Labour hours per unit 0,5 1.5 1 Machine hours per unit 1.5 1 Product X Product Y Product z Materials per Volume (Units) unit (NS) 20750 12 1250 257 000 3 Direct labour costs are N$6 per hour. Production overhead are absorbed on a machine hour basis. with a rate for the Period set at N$ 28 Per machine hour Further analysis shows that the total of production overheads may be divided as follows: Percentage (%) 35 20 15 Set-up costs Costs relating to machinery Material handling cost Inspection cost Total production overhead 30 100 The following activity levels are associated with the product lines for the whole financial period. Number of set-ups Number of times materials are moved 12 Number of inspections 150 180 670 Product X Product Y Product Z 75 115 480 - Page 22 of 27 Required Marks 1.1 Calculate the cost per unit for each product using conventional costing methods. 1.2 Calculate the cost per unit for each product using ABC principles. 20 1.3 Comment on the reasons for any differences in the two costs calculated for each product line. Question 2 (15 Marks) A factory with three departments uses a single production overhead absorption rate, expresse as a percentage of direct wages cost. It has been suggested that departmental overhea absorption rates would result in more accurate job costs. Set out below are budgeted and actu data for the previous period, together with information relating to job no. 650. Direct wages Direct labour hours Machine hours Production overheads Budget: Department A N$ 25 000 100 000 25 000 150 000 10 000 50 000 25 000 85 000 40 000 10 000 N$ 120 000 30 000 75 000 225 000 50 000 Total: Actual . Department A B N$ 30 000 80 000 30 000 140 000 45 000 14 000 12 000 45 000 30 000 87 000 N$ 130 000 28 000 80 000 238 000 Total: 59 000 During this period in no 650 incurred the actual costs and actual times in the departments as