Question 2 Wexxon Plc currently makes four products for sale on the local market. Details of the four products and relevant information are given below for one period: Product Axxon Beach Capal Delta Output in units 120 100 80 120 Cost per unit: Direct material $40 $50 $30 $60 Direct labour $28 $21 $14 $21 Machine hours (per unit) 4 3 2 3 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overhead is currently absorbed by using a machine hour rate, and the total of the production overhead for the period has been analyzed as follows: Machine Department costs Set up costs Stores receiving costs Inspection/ Quality control Material Handling and Dispatch $ 10,430 5,250 3,600 2,100 4,620 You have ascertained that the cost drivers to be used are as listed below for the overhead costs shown: COST Set up cost Stores receiving Inspection/ Quality Control Material handling and dispatch COST DRIVER Number of production runs Requisition raised Number of production runs Orders executed The number of requisitions raised on the stores was 20 for each product and the number of orders executed was 42, each order being for a batch of 10 for the products. Required: (a) Calculate the total cost of each product using the traditional method (overheads are absorbed on a machine hour basis) and Activity Based Costing (ABC).