QUESTION 3 (35 MARKS)

Wood Limited, a newly established manufacturing company in the Southern Industrial area, manufactures two types of Boardroom Tables. One type of these Boardroom tables is sold locally and the other type is exported to Angola. While the designs are identical, the material used is different to cater for the different climatic conditions of the market segments. The two products are produced with the same equipment and they utilise the same overhead resources. In 2021, the company has budgeted to manufacture 60 000 Boardroom Tables for the local market and 40 000 Boardroom Tables for export to Angola. The manufacturing is done in batches of 1 000 Boardroom Tables each. Other details of the companys activities, inputs and outputs are as follows:

Analysis of overhead costs

Material handling	N$ 200 000
Material procurement	N$ 40 000
Machine set-up	N$ 180 000
Quality control	N$ 270 000
Production	N$ 610 000
Depreciation	N$ 200 000
TOTAL	N$ 1 500 000

Analysis of cost drivers

Overhead	Cost driver	Local	Export
Material handling	Material movements	100	60
Material procurement	Number of orders	200	200
Machine set-ups	Number of set-ups / batch	1	1
Quality control	Number of inspections	150	100
Depreciation	Machine hours / unit	3	5
Production	Direct labour hours / unit	0.75	0.50

The company management has been using the traditional costing approach to allocate overheads between the two products, with direct labour hours as allocation base. They are thinking of applying the Activity-Based Costing System.

REQUIRED: Calculate the overhead cost per unit, using;

3.1 The Traditional Costing Approach

3.2 The Activity-Based Costing Approach