Question 2 (24 marks) Advanced Electronic Company is a chipset maker manufactures and sells a variety of integrated circuit (C) products. The company has three key product lines accounting for 90% of the total business. Revenue and cost data of the three product lines in the month of April are as follows: Product Model-1 Model-2 Model-3 Units produced and sold Unit selling price Direct materials Direct labor Machine hours consumed S35 $70,000 60,000 300 hours 90 hours 60 hours The company adopts a simple costing system by allocating the manufacturing overhead based on the machine hours which are used to manufacture the three models. Manufacturing overhead incurred in the month includes the following Activity 62,500 15,000 66,000 36,500 180,000 Quality control Machinery Materials handling Recently the company has learned that an activity-based costing (ABC) system can provide more accurate cost information through analysing bow the products use the activities during the operating processes. The following data are collected from operations for April: Activity Cost Driver Model- Model-2 Model-3 No. of 60 100 120 90 240 204 60 20 engineering hours y contr No. of inspection hours No, of machine hours No, of orders Materials handling (a Use the current simple costing system to prepare a product line and total 5marks) company income statement with profitability % for the month of April. (b) Use the activity based costing system to prepare the product line and (8 marks) total company income statement with profitability % for the month of April. Show all your workings. (c) Compare and explain dilTerences in product costs under the product marks) costing systems in (a) and (b) above. What are the implications for the company's pricing strategy? (d) Identify four benefits that activity based costing system would bring to (4 marks) the company