QUESTION 1 Kajaria is model M2. Details of the two a manufacturing business which makes a product in two models: Model M1 and products are as follows: Model M1 Model M2 8,000 units 8,000 units Particulars Annual sales Number of sales orders 60 Sales price per unit Direct material cost per unit $11 Direct labour hours per unit 2 hours Direct labour rate per hour $8 Special parts per unit Production batch size Set-ups per batch 250 $73 $21 $54 2.5 hours $8 2,000 units 100 units 3 Other relevant information is as follows: Particulars Setup costs Amount ($) Cost driver 97,600 Number of setups 42,000 Material handling costs Number of batches Special part handling 50,000 Number of special costs parts Number of sales orders Invoicing 31,000 108 000 Direct labour hours Other overheads A customer has indicated an interest in placing a large order for either model M1 or M2 and the sales manager wished to try to sell the higher priced model M2. Required (a) Calculate the profit per unit for each model using activity-based costing. (b) Identify which product the sales manager should try to sell based on the information provided by your analysis. If there is a loss-making product, then advise the relevant information that the management needs to consider in taking any decision in relation to the loss making product. (20+5- 25 marks)