Use the information provided below to calculate the following:

3.1 The manufacturing costs per unit and the total manufacturing costs, if all the overheads costs are absorbed on a machine hour basis. (4 marks)

3.2 The overheads cost per unit using the ABC system. (16 marks) INFORMATION Visa Limited manufactures two products and the company is keen on applying the principles of activity-based costing (ABC).

Relevant information pertaining to the two products for a given period appear below:

Product A Product B Output in units 720 and 540

Machine hours per unit 7 and 5

Direct materials cost per unit R300 and R240

Direct labour cost per unit R147 and R105

The two products are similar and are usually produced in production runs of 20 units and sold in batches of 10. Currently the production overheads are absorbed by using a machine hour rate, and the total of the production overheads for the period are as follows:

R

Machine department costs (rent, rates, depreciation and supervision) 30 960

Set-up costs 15 120

Stores receiving 11 160

Inspection/Quality control 6 300

Materials handling and dispatch 13 860

The cost drivers (in random order) to be used for the overhead costs are as follows:

Orders executed

Number of production runs (used twice)

Requisitions raised

Machine hours

The number of requisitions raised on the stores was 120 for each product and the number of orders executed was 126, each order being for a batch of 10 of a product.