Question 4 Marine Components manufactures two products: JZ500 and XR800. The company operates in a competitive market and has recently seen a decline in market share of XR 800 to aggressive competitors. Marine Components is reviewing its costing and pricing strategies to see if improvements can be made. Currently Marine Components uses a traditional costing system to assign overheads to nraduction usine direct labour hours and sets selling prices by adding 40% to a producte total cost. The budgeted overhead and labour hours for the year are $1,965,000 and 21.000 respectively. The company's records have revealed the following data regarding the company's products: JZ500 XR800 Production (units) 2,500 5,000 Direct material $44 $66 Direct labour 26 ^2 hours of direct labour are used to produce each unit of JZ500 and 3 hours per unit for XR800 The company's accountant has suggested Marine Components considers moving towards an activity-based costing system. He has provided the following information after analysing the company's manufacturing processes: Activity Setups General Manufacturing Machine processing Cost $ 250,000 1,575,000 Cost Driver Volume JZ500 XR800 Total 104 21 | 125 5,250 15,750 21,000 Cost Driver Number of setups Direct labour hours 140,000 Machine Hours 2,600 900 3,500 Required (a) Compute the per-unit cost and selling price of JZ500 and XR800 under: (i) (ii) The company's traditional costing method. Activity based costing. (Smarks) (8 marks) (b) Compare the per unit costs you calculated in (a) above. Which rate is a better reflection of the real cost of JZ500 and XR 800? Explain in your own words using the case facts to support your theoretical argument. (7 marks) (TOTAL: 20 marks)