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QUESTION 1: HURON LTD HURON Ltd makes shoes in two ranges such as Basic and Super. Information relating to each of these products is set

QUESTION 1: HURON LTD

HURON Ltd makes shoes in two ranges such as Basic and Super. Information relating to each of these products is set out below:

Basic Super
Selling price per unit 180 250
Material Cost per unit 20 80
Labout time per unit 4 4
Labour rate per hour 15 15
Number of Units Produced Each Year 2,000 3,000
Cost Drivers
Number of Quality Inspections 50 350
Number of Sales Invoices Issued each year 20 180
Number of batches per total production 10 40
Machine Hours total 600 5,400

The Director of Huron Ltd has produced the following analysis of total overheads per year and their relevant cost drivers:

Cost Pool () Cost Drivers
Quality Inspection 140,000 Number of Quality Inspections
Sales Invoicing 80,000 Number of Sales Invoices Issued each year
Material Handling 60,000 Number of batches per total production
Other Overheads 120,000 Machine Hours total
400,000

Required:

Calculate full cost per unit and profit per unit for each product using:

- Traditional full cost method of overhead absorption (based on direct labour hours) (15 marks)

- Activity-based costing (ABC) method. (20 marks)

(Total: 35 marks)

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