Read the scenario below and answer the questions that follow: JP manufacturer's two products, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost-plus basis to determine the selling price of its products. This is based on full cost, using an overhead absorption rate per direct labour hour. For Product X, the overhead cost per unit based on traditional costing is R2.88 per unit; for Product Y it is R7.14 per unit. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that the activitybased costing approach may be more appropriate. The following information relates to the budget for the year ahead: Product X: the material cost X is R10 per unit and labour cost is R10 per hour and two labour hours are needed to produce one unit of Product X. Product Y: the material cost is R15 per unit and labour cost per unit is also R15 per unit. Production overhead cost budget Machinery costs 237 500 Set-up costs 223 250 Purchasing costs 325 000 Total production overheads 785 750 The following table shows the total budget activities of the company, which manufactures many different types of products, as well as the details relating to the manufacture of two product lines: X and Y. Data Total Product X Product Y Machine hours 95 000 2 per unit 1 per unit Number of production runs 235 20 Purchase order 5 000 100 100 Production quantities of X & Y 5 000 units 20 000 units Required: 1.1 Using activity-based costing and traditional costing, calculate the production cost per unit that would be attributed to Product X and Product Y. (15) 1.2 Explain how activitybased costing could provide information that would be relevant to the management team when it is making decisions about how to improve JP's profitability