SPIRAL Required A. Determine the total cost to produce one unit of each product on the basis of traditional costing system. (3Marks) B. Determine the total cost to produce one unit of each product on the basis of activity based costing technique. (5 Marks) C. Explain why overhead cost shifted from the high volume product to the low volume produ under Activity based costing. (2 Marks) Q2. A Company manufactures three products. The data is given as under: Particulars Budgeted Units Product A 1800 Product B 3000 Product C 1200 55 50 Q1. Surfs Up manufactures surfboards. The company produces two models: the small board and the big board. Data regarding the two boards are as follows: Product Big Small Direct labour Hrs. per unit Annual Production Total Direct labour Hours 10000 board 35000 board 15000 1.5 1 35000 The big board requires Rs. 3,750 in direct materials per unit, whereas the small board requires Rs.2000. The company pays an average direct labour rate of Rs.650 per hour. The company has historically used direct labour hours as the activity base for applying overheads to the board. Manufacturing Overhead is estimated to be Rs.8,32,00,000 per year. The big board is more complex to manufacture than the small board because it requires more machine time. Mr. Upadhyay, the company's controller is considering the use of Activity based costing to apply overheads because the surfboard requires such different amount of machining. Mr Upadhyay has identified the following four service activity centers. Activity Center Cost Driver Machine Set Up Special Design Production No. of Set Ups Design Hours Direct Labour Hours Traceable Costs (Rs.) 50,00,000 All Boards 200 set ups Big Board Small Board 100 100 1,82,00,000 1000 design hours 900 100 Machining Machine Hours Total 50000 labour hours 4,50,00,000 1,50,00,000 10000 machine hours 8,32,00,000 15000 35000 9000 1000