Question 3 Omega Pte Ltd manufactured two models of clocks: Standard and Trendy. The standard clock sells for $8 and Trendy sells for $10. The company is planning production for the next period and the Marketing Director wanted to know how profitability of each model. The following were the overhead costs and cost drivers. Overhead Item Setup costs Purchasing costs Maintenance costs Electricity Expected Cost Cost Driver $96,000 Number of setups S64,000 Number of purchases $120,000 Machine hours $32,000 Kilowatt-hours Expected Actual Transactions 200 2,000 12,500 40,000 The following data is retrieved for the jobs completed. Standard $1,800 $1,500 800 50 Direct materials Direct labor Units completed Direct labor hours Number of setups Number of purchases Machine hours Kilowatt-hours Trendy $500 $450 250 10 2 5 25 30 4 20 12 The company practical activity is 4,000 direct labour hours. Compute the unit cost for the Standard and Trendy clocks using direct labour hours to apply overhead. $9/unit $6.92/unit (8 marks) (b) Compute the unit cost for Standard and Trendy clocks using activity-based costing system. $5.14not $9.34/unit (12 marks) Explain which costing method gives the Managing Director a more accurate picture of the cost and profit margin