Question 2 The Morris Company produces metal frames-frame A and frame B. Factory overhead is applied on the basis of machine hours. There were 50.000 frames of A and 200,000 Trames of B produced and the following costs for direct materials and direct labour were incurred: Direct Materials ($) Direct Labour (S) Frame A 10,000 4,000 Frame B 100,000 40,000 Factory overhead costs of $154,000 in total were incurred. The data in the following table relate to the factory overhead costs of $154,000. There are three different activity cost drivers. Eram Overhead activity Maintenance Machining Set ups Material handling Total Overhead Cost ($) Cost Driver 44000 Machine hours 55000 Machine hours 25000 Number of set ups 30000 Number of moves 154000 Cost Driver Consumption Frame A Frame B 2000 20000 2000 20000 40 60 50100 Required: (a) If the company used a plant-wide rate last year to apply overhead to the products on the basis of machine hours as the base for applying overhead, calculate: The plant-wide factory overhead recovery rate per machine hour ii. The cost per unit of each product (b) If the company decided to adopt activity-based costing to apply overhead cost to the products using the cost drivers as basis, calculate for last year: 1. The factory overhead recovery rate for each of the cost drivers ii. The cost per unit of each product iii. The total cost to produce each product (c) Your manager has also asked you to identify the key features of organisational policy & procedures that need to be updated if the company wishes to switch to ABC costing system now