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 Machine hours per unit 1.5 0.5 Product X Product Y Product Z Materials per Volume (Units) unit (NS) 20 750 12 1250 257 000 1,5 Direct labour costs are N$6 per hour. Production overhead are absorbed on a machine hour basis. Further analysis shows that the total of production overheads may be divided as follows: Percentage (%) 35 Set-up costs Costs relating to machinery Material handling cost Inspection cost Total production overhead 20 15 30 100 The following activity levels are associated with the product lines for the whole financial period. Number of set-ups Product X Product Y Product Z 75 115 480 Number of times Number of materials are moved inspections 150 180 87 670 Mark Required 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 Comment on the reasons for any differences in the two costs calculated for each product line