Required:

1. Calculate the unit costs of the kayak and canoe products using activity based costing.
2. Calculate the unit costs of the kayak and canoe products using a traditional cost system where overhead costs are allocated on the basis of direct labour hours.
3. Why do the unit product costs differ between the two systems? Explain.

le Canada Outdoor Company manufactures kayaks and canoes. Annual production and costing data for the two products are shown in the tables below: Annual Product Data for Canada Outdoor Company Product Data Kayak Canoe Annual production quantity in units 100 1,000 Material cost per unite $50 $5002 Direct labour hours per unite le 102 Direct labour cost per hour $100 $102 Number of purchase orders required le 2e Number of engineering work orders se required Number of machine setups required 24 42 Annual Activity Costs for Canada Outdoor Company Activity Annual Costs Purchasing and receiving $24,000 Engineering 18,000 Activity Measure Number of purchase orderse Number of engineering work orders Number of machine setups 24,600 $66,600 202,000 Number of direct labor hours Machine Setup Non-production volume related Machining, power & maintenance Materials planning & handling Production volume related Total factory overhead costs 101,000 Number of materials dollars 303,000 369,600