QUESTION 5: NORTHERN LTD Northern Ltd makes two products A and B. Information relating to each of these products is set out below. A 100 B 120 Selling price per unit Material cost per unit 45 60 Labour time per unit 2 hours 2 hours 14 14 Labour rate per hour Number of Units Produced each year 6,000 units 8,000 units 100 500 300 200 Number of sales invoices issued each year Size of each production batch Bought-in parts per unit Machine set-ups per batch 1 4 3 6 Machine Hours total 7.400 29,600 The Finance Director of Northern Ltd has recently produced the following analysis of overheads and their relevant cost drivers: Cost (E) Cost Pool Bought-in parts handling costs 150,000 Materials handling costs 66,000 Cost Driver Number of bought-in parts Number of production batches Number of sales invoices issued Number of machine set- ups Machine hours Sales invoicing costs 18,000 28,000 Machine set-up costs All other overheads Total overhead costs 74.000 336,000 Required: A) Calculate the total cost per unit and profit per unit for each product using: the traditional full cost method of overhead absorption (based on labour hours) (2 marks) - the activity-based costing (ABC) method (5 marks) B) Comment on your findings and suggest an action plan accordingly (1 mark)