QUESTIONS: ABC Ltd. is a multiproduct company, manufacturing three products A, B and C. The budgeted costs and production for the year ending 31st March are as follows: A B Production quantity (Units) ) 4,000 3,000 Resources per Unit: Direct Materials (Kg.) 6 30 45 1,600 3 60 Direct Labor (Minutes) The budgeted direct labor rate was RO 10 per hour, and the budgeted material cost was RO 2 per kg. Production overheads were budgeted at RO 99,450 and were absorbed to products using the direct labor hour rate. ABC Ltd. followed the Absorption Costing System. ABC Ltd. is now considering to adopt an Activity Based Costing system. The following additional information is made available for this purpose. 1. Budgeted overheads were analyzed into the following: Material handling Storage costs Electricity (RO) 29,100 31,200 39,150 2. The cost drivers identified were as follows: Material Weight of material handled handling Storage costs Electricity Number of batches of material Number of Machine operations 3. Data on Cost Drivers was as follows: A B For complete production: Batches of material 10 5 15 Per unit of production: Number of Machine operations 6 3 2 You are requested to: 7. 2. PREPARE a statement for management showing the unit costs and total costs of each product using the absorption costing method. PREPARE a statement for management showing the product costs of each product using the ABC approach. 3. STATE what are the reasons for the different product costs under the two approaches?