Smart Manufacturing Company makes two types of hiking sticks identified as A and B. The data of these two products appears below: Particulars Product A Product B Selling price per unit Rs. 140 Rs. 99 Direct material per unit Rs. 72 Rs. 53 Direct Labour per unit Rs. 24 Rs. 12 Direct labour hours per unit 2.00 Hours 1.00 hour Estimated annual production 20,000 units 80,000 units The company has a traditional costing system by which manufacturing overhead is applied to units based on direct labour hours. Annual manufacturing overhead cost is estimated at Rs. 1,980,000 while the total direct labour hours are expected to be 120,000. Required: 1) Compute product margin for product A and B under traditional costing system. 2) The company is considering replacing its traditional costing system with an activity based costing system that would assign its manufacturing overhead to the following four activity cost pools: Activities and activity measures Overhead cost Expected activity Product A Product B Supporting direct labour (direct labour hours) Rs. 783,600 40,000 80,000 Batch setups (setups) Rs. 495,000 200 100 Product sustaining (Number of products) Rs. 602,400 01 01 Plant maintenance Rs. 99,000 1/2 1/2 Total manufacturing overheads Rs. 1,980,000 Compute the product margin for Products A and B under activity based costing system. 3) Evaluate the profitability of each product and comment on the reliability of product costing under each costing systems. ( Marks 08 )