The Garden Company manufactures and sells three types of garden tables, A, B and C, which appeal to different market segments. The tables are manufactured in batches of 1,000 units each. The company uses a traditional absorption costing system which allocates manufacturing overheads (i.e. machine set-up and quality inspection costs) based on direct machine hours. The following data applies: Budgeted annual sales (units) A 30,000 B 90,000 60,000 B Budgeted data per unit (): Selling price Direct material cost Direct machine cost Manufacturing overhead Full manufacturing cost per unit A . 32.00 8.00 15.00 3.00 26.00 20.00 4.00 5.00 6.00 15.00 25.00 6.00 10.00 4.50 20.50 C 30 Budgeted data per 1000-unit batch: Direct machine hours Machine set-up hours Inspection hours A 20 2 25 B 40 0.5 15 1 20 Total activity levels and machine set-up and inspection costs for the year are estimated as follows: Direct machine Machine set-up Inspection 6,000 hours 165 hours 3,300 hours Machine set-up cost Inspection cost Total overhead costs 500,000 400,000 900,000 Required: a) Calculate the profit per unit for each table type that would be reported under the traditional costing system. b) Calculate the profit per unit for each table type that would be reported under an activity-based costing system. c) Explain the differences in overheads allocated to the three products under the two costing systems. In what sense may the traditional costing system be deemed 'biased' against product B? d) What does the activity-based costing system suggest about the appropriateness of the current prices? Discuss in the light of your results in (a) and (b) above. e) Discuss merits and limitations of activity-based costing