Question 2. Tablescape Decorations Ltd. produces three distinct products and sells them in bulk to smaller retailers. Its managers are concerned that the company's profit is not as high as its competitors. They believe they fall in profits could be caused due to the company's uncompetitive selling price(s), for one or more product, and losses on other products. Details of the company's costs and selling prices are as follows: Product Woven Placemats Table Runner Napkin Rings E E Selling Price 20 45 62 Direct Costs Labour 6 10 20 Mirect Material- brass wire 12 :ct Material - other - 4 20 18 Direct Cost 10 30 SO 5,000 produced Hours 1 hour per unit 6,000 2 hour per unit 6,500 2 hour per unit tly the company uses the traditional method of allocating indirect overheads but is Jering using the ABC method for increasing the accuracy. The company's indirect overheads wie as follows: Depreciation Purchasing Expenses Direct Material - brass wire inspection costs Direct Material - other delivery inspection costs Set-up costs - Canteen expenses 25,000 20,000 6,000 9,000 9,000 6,000 Activities associated with the overheads are: Woven Placemats Number of suppliers 6 Component deliveries per month 4 Production runs per month 10 No. of employees 20 Value of machinery Table Runner 2 4 15 10 10,000 Napkin Rings 2 2 2 20 20 15,000 15,000 Required: - a) Calculate the profit per unit for the three products based on the company's current Labour Hours based overhead method. . (5 Marks) Continued on next page 4 b) Calculate the profit per unit for the three products using the principles of ABC. Explain your reasons for choosing the bases of overhead allocation (15 Marks) TOTAL MARKS = 20 Continued on next page