QUESTION 1: SUPERIOR LTD

SUPERIOR 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	80	160
Material Cost per unit	10	50
Labour time per unit	2 hrs	3 hrs
Labour rate per hour	12	12
Number of Units Produced Each Year	3,000	4,000
Cost Drivers
Number of Quality Inspections	50	450
Number of Sales Invoices Issued each year	20	380
Number of batches per total production	4	36
Machine Hours total	800	7,200

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

	Cost Pool ()	Cost Drivers
Quality Inspection	120,000	Number of Quality Inspections
Sales Invoicing	60,000	Number of Sales Invoices Issued each year
Material Handling	80,000	Number of batches per total production
Other Ovreheads	100,000	Machine Hours total
	360,000

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)