Question 1. Comma Ltd. manufactures two types of products: Standard and Deluxe. Each product requires the incorporation of a difficult-to-handle special part (one of them for one unit of Standard and four for one unit of Deluxe). Both of these products are made in batches (large batches for Standard and small ones for Deluxe). Each new batch requires that the production facilities are "set- up". Details of the two products are: Standard Deluxe Annual production and sales-units Sales price per unit 12,000 12,000 65 87 Batch size-units 1,000 50 Direct labour time per unit - hours 2 2.5 Direct labour rate of hour 8 8 Direct material cost per unit 22 32 Number of special parts per unit 1 4 Number of se-ups per batch 1 3 Number of separate material issues from stores per batch Number of sales invoices issued per year 1 1 50 240 In recent months, Comma Ltd. has been trying to persuade customers who buy the Standard to purchase the Deluxe instead. An analysis of overhead costs for Comma Ltd. has provided the following information: Required: Overhead cost analysis Set-up cost 73,200 Cost driver Number of set-ups Special part handling cost 60,000 Number of special parts Customer invoicing cost 29,000 Number of invoices Material handling cost 63,000 Number of batches Other overheads 108,000 Labour hours a) Calculate the profit per unit and the return on sales for Standard and Deluxe using both: The traditional direct-labour-based absorption of overheads method. The activity-based costing method. b) Comment on the managerial implications for Comma Ltd. considering the results above.