Required: A. Calculate the cost of both products based on a traditional plant-wide rate using direct labour costs to assign overheads. [2 Marks] B. Calculate the activity cost rates for: a. Set-Ups; b. Material Handling c. Packaging and Shipping. C. Cost the two products using an activity-based costing system. D. Comment briefly on implications of the different costing results and action that may take if shift to ABC method.

Question 2: Preparing an Income Statement Trusty Electronics Limited manufactures only two (2) products: a major headset part, and a dishwasher The company uses the activity-based costing system with the three main cost drivers of activity noted in the table below. Any additional overhead costs are currently allocated using a plant-wide overhead rate based on direct labour hours. External cost consultants have recommended, however, that the company should switch to a traditional absorption costing system. The company estimates that during 2020 it (the company) will produce 21,000 major headset parts/units, and 14,000 dishwashers. Each major headset unt requires three (3) direct labour hours to produce whilst the dishwashers take four (4) direct labour hours to produce. The direct material and direct labour costs included in the two products are as follows Items Direct Material (per component Direct Labour (per component Headset Unit $120 S56 Dishwasher $87 S61 The budgeted (estimated) total factory overhead data for 2018 is given as: Items Production Set-U Material Handlin Packaging and Shippin Total Factory Overhead Budgeted Overhead S) Estimated Volume Level $3,480,000 $1,570,000 $2,520,000 $ i 1 .970.000 Based on analysis of the consultants of the three overhead activities, 30 Set-U 15,000 kgs 9,000 boxes is estimated the two production activities in 2018 is as follows: Activit Headset Unit Dishwasher Overall Production Set-U Material Handlin Packaging and Shippin 10 Set-U 10.000 k 5,000 boxes 20 Set-UU 5.000 kgs 4,000 boxes 30 Set-UU 15,000 kgs 9,000 boxes Required: A. Calculate the cost of both products based on a traditional plant-wide rate using direct labour costs to assign overheads B. Calculate the activity cost rates for: [2 Marks] 3 Marks] a. Set-Ups b. Material Handling c. Packaging and Shipping C. Cost the two products using an activity-based costing system. D. Comment briefly on implications of the different costing results and action that may take if shift to [3 Marks] ABC method 2 Marks] 5I P a ge