Sirocco is a wind turbine manufacturer based in Tangiers, northern Morocco. The company manufactures turbines
Convert wind kinetic energy into electrical energy. The company uses the traditional total cost system to calculate the costs of manufacturing models
The company's main turbine; 1_WT, 2_WT, 3_WT, 4_WT. The company uses a single pool of non-industrial costs
direct, which amounted to 500,413.1 US dollars. Distribution of the total indirect industrial costs to the turbine models
The four are using the overall loading rate based on the total direct labor cost. In other words, the indirect industrial cost
For each turbine model, it is determined by multiplying the direct labor cost of each model by the overall loading rate.
Section one: wind turbine manufacturing cost
The company's president, Mr. Mahdi, recently raised his concerns regarding the profitability of the 4_WT. Mr. Mehdi is thinking of giving up a model
4_WT from the company's production line due to its high industrial overhead costs, which exceed $27,000 per
lonliness. He believes that pricing (sales price) the 4_WT at about $63,000 above its total cost will result in
Low market share, as competition wind turbines in the market with similar specifications are priced in the range of 55,000
Dollars - $60,000. Mr. Mahdi has appointed you as the new Financial Controller since you hold the qualification of Certified Management Accountant (CMA) -
To assess the profitability of each turbine model before canceling the 4_WT model.

In the first week of work, you are provided with the following table summarizing the overhead (incremental) manufacturing costs:
Statement amount in dollars
Purchases 76000

Qualification of machines for production cycles 103500
Material transportation 96000
Machines 658000
. design 280000
Follow-up and control 200000
total 1413000

You also asked the Department of Administration and Cost Accounting to provide you with additional data regarding the four models. Additional data summarizing
Information about direct costs (materials and labour) and cost drivers (basic charge) for cost-producing activities
Indirect (additional) industrialization and the number of units produced for each model:
WT_4 WT_3 WT_2 WT_1 Nybla
Units produced 20 20 30 30
Direct materials cost $100,000,100,000,100,000,190,000
Direct labor cost $90,000,90,000,174,000$
download basis
Purchase requisitions 185 23 131 41
Machinery Qualification Courses 148 37 74 111
Number of material transfers 700 220 460 220
Good luck 28,000 28,000 3,500 10,500
Design hours 6,400 16,000 3,200 6,400
Follow-up and monitoring hours 12500 3000 25000 28000

I have reviewed the information above, and noticed that the company uses the traditional costing system (the simple method) even though the
The indirect (extra) costs are clearly the result of several activities. I tried to persuade Mr. Mahdi not to discontinue the 4_WT model from
By explaining that the system currently used does not contribute to the effective distribution of costs, and therefore the profitability of this model of turbines may appear
Less result of using traditional costing system. Where she advised the head of the company to use a more accurate and effective system in allocating costs
The additional industrial activities are based on the use of each model for these activities. Therefore, Mr. Mahdi took care of your request by using the method
You will be asked for a new summary of costs based on this new method.

Required:
a) Prepare a report for Mr. Mahdi showing the cost per unit calculations for each turbine model under both the conventional costing system and the . system
New costing (activity-based costing system).
b) Explain the differences in unit cost for each model.
c) Write your recommendations in detail to Mr. Mahdi regarding whether to discontinue the 4_WT model based on the unit cost you
Determined by the new cost system.
d) Explain how the new costing system you have proposed improves the accuracy of the reported cost of individual models compared to the system the old.