ABC QUESTION: Owl Ltd This company has a subsidiary called Birdy Limited and is worried about the costing process Birdy Ltd makes two products, Feathers and Claws. It currently recovers overheads using a rate per direct labour hour. Information relating to each of these products is set out below. Claws 91 18,000 units 800 Feathers Selling price per unit 52 Annual sales volume 15,000 units Number of sales invoices issued each year 200 Labour time per unit 2 hours Labour rate per hour 10 Material cost per unit 25 Size of each production batch 750 Bought-in parts per unit Machine set-ups per batch 5 hours 10 30 1,000 MAD Sem 7 The Finance Director of Birdy Ltd has recently produced the following analysis of overheads and their relevant cost drivers. Type of overhead Bought-in parts handling costs Materials handling costs Sales invoicing costs Machine set-up costs All other overheads Total overhead costs Cost driver Number of bought-in parts Number of production batches Number of invoices issued Number of machine set-ups Labour hours 96,000 38,000 20,000 26,000 60,000 240.000 Required: (a) Calculate the total cost per unit and profit per unit for each product using: (1) The traditional full cost method of overhead absorption. (2) The activity-based costing method. (b) Comment on your findings. MAD Sem 7