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Realwood Pty Ltd manufactures two types of timber felling machines Toppler and Muncher. The company is currently using a traditional costing system with machine hours
Realwood Pty Ltd manufactures two types of timber felling machines Toppler and Muncher. The company is currently using a traditional costing system with machine hours as the cost driver. The company is considering Whether to use the activity-based costing (ABC) method to allocate overhead costs to products. Budgeted overhead costs of the upcoming accounting period follow: Activity Total budgeted Budgeted level activity cost for activity driver 000 000 50000000 Machine $47 000 Number of 16 000 hours maintenance 11130111113 Setup $250 000 Number of 400 runs production Budgeted information about the two products follows: Muncher Toppler Number of material moves 320 280 Number of production runs 60 100 Total machine hours 105 00 5500 Units completed 3000 1000 Direct material cost per unit $20 $35 Direct labour cost per unit $40 $70 Required: (a) Calculate the unit cost of each product if the conventional costing approach is used. (b) Determine the cost of producing each product if activity based costing is used
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