QUESTION 3 (12 MARKS) XYZ Cc manufactures a variety of products for the local market. The company has been using labour hours to calculate an overhead allocation rate. The total budgeted overhead for the year is N$955 980, the labour hours are estimated at 5 500 hours and machine hours are estimated at 5 000 hours. The newly appointed financial director proposed that the traditional costing system should be changed to an Activity Based Costing (ABC) system. The management accountant provided you with the following information relating to the overheads: Cost pool Set-ups Quality control and testing Material ordering Packaging and dispatch Budgeted Overhead expense Cost driver and activity level N$169 500 500 set-ups N$222 600 1 500 quality tests N$192 780 1 620 orders N$68 400 192 packages Page 3 of 4 Labour related activities Machine related activities N$126 500 5 500 labour hours N$176 200 5 000 machine hours Total Budgeted overhead N$955 980 REQUIRED 3.1 Compute an overhead allocation rate, using traditional costing methods, based MARKS on: 3.1.1 Labour hours 3 3.1.2 Machine hours 3 3.2. Compute cost driver rates using the principles of activity based costing. TOTAL MARKS 6 12