QUESTION 7: ABC costing (14 marks) Kombucha Kings produce two types of Kombucha!, Lemon & Ginger and Raspberry. The barrels require significant maintenance between batches and can be used only a few times. The company currently uses a traditional costing system with total manufacturing overhead of $375 000 being applied to the two products according to their proportion of direct labour dollars. Assume the following production and cost information for the most recent year: Lemon & Ginger Raspberry 200 000 25 000 Number of bottles produced Unit cost information Direct materials Direct labour Manufacturing overhead $2.00 $1.00 ? $4.00 $2.00 ? The company has conducted ABC analysis and traced the manufacturing overhead costs to four (4) activity pools, with the following cost drivers (see table below): Activity Cost Pool Total Cost Amount of Cost Driver Purchasing and receiving Setup for production Fermenting and aging Quality control TOTAL $90 000 $100 000 $80 000 $105 000 $375 000 450 000 kilograms of raw materials 400 Number of batches 200 000 Number of fermentation days 20 000 Number of inspections Below, is the activity (elated information has been collected for each of the two products: Lemon & Ginger Raspberry Kilograms of raw materials Number of batches Number of fermentation days Number of inspections 400 000 200 30 000 2 000 50 000 200 170 000 18 000 Required: 1. Calculate the total manufacturing cost per bottle of the two different types of Kombucha using the traditional costing method. Show all workings. [3 marks] 2. Calculate the total manufacturing cost per bottle of the two different types of Kombucha using the ABC costing method. Show all workings. [7 marks) I 3. Compare the manufacturing cost of each product using the traditional system vs ABC costing. Which product was under costed under the traditional system when compared to ABC? Show all workings. [4 marks]