The DM Ltd produces four products, W$,$ X$,$ Y and Z using the same plant and processes.

The following information relates to the company.

Products

Volume $($units$)$ W

$1,000$ X

$10,000$ Y

$1,200$ Z

$14,000$

Material cost$/$unit $($Shs$.)10103234$

Direct labor$/$unit $($Hours$)1143$

Machine time$/$unit $($hours$)(1)/(2)(1)/(2)23$

Labour cost$/$unit $($Sh$.)662418$

The cost accountant analyzed the production overhead recorded as under the following headlines: $-$

Overhead cost

Factory overhead $($Machine oriented activity$)$ Sh$\mathrm{.}000$

$74,848$

Set$-$up costs $8,710$

Material cost. $($Cost of ordering material$)3,840$

Material handling costs. $15,160$

Administration cost for repair parts. $17,200$

Overhead costs are absorbed by products on a machine hour rate of sh$\mathrm{.}9\mathrm{.}60$ per hour

giving an overhead cost per unit for products as follows:$-$

Product

Number of set$-$ups W

$2$ X

$12$ Y

$4$ Z

$16$

Number of material orders $216216$

Number of times material handled. $420624$

Number of spare parts used $41028$

Required:

a$)$ Unit costs per product using Activity$-$based costing. $(14$ Marks$)$

b$)$ Comment briefly on the difference between overhead traced by present system and those

used by Activity based costing system. $(6$ Marks$)$