x Homework Help - Q&A from On! x + 220/mod_resource/content/1/TACC602-13%2C%202021-Final%20Exam%20%28M Windows Marketpl... Windows Media Imported From IE 9.0 IELTS General 5 6 67% Question 4 (20 marks) Sydney Equipment Lid manufactures two products, basic and superior, and applies overhead on the basis of direct labour hours. For the next accounting period, the estimated total amount of manufacturing overhead and total direct labour hours are $1,920,000 and 25,000 hours, respectively. Relevant information about the two products is available as follows: Basic Superior Estimated production volume 3 000 units 4 000 units Direct material cost $50 per unit $80 per unit Direct labour hours 3 hours per unit 4 hours per unit Direct labour rate $24 per hour $24 per hour The manufacturing overhead of $1 920 000 can be identified with three major activities: order processing ($360,000), machine processing ($1,344,000) and product inspection ($216,000). These activities are driven by number of orders processed, machine hours worked and inspection hours, respectively. Below is the activity data relevant to the two products: Basic Superior Orders processed 330 220 Machine hours worked 19,800 24.200 Inspection hours 2,200 8,800 The top management is very concerned about declining profitability despite a healthy increase in sales volume. The decrease in profit is especially puzzling because the company recently undertook a massive plant renovation during which new, highly automated machinery was installed expecting to achieve significant operating efficiencies. Required: (a) Using traditional costing method applying manufacturing overhead to production based on direct labour hours, calculate the product costs per unit of the two products. (5 marks) (b) Using activity-based costing method, calculate the product costs per unit of the two products. (10 marks) (c) Based on your calculations in (a) and (b) above, explain which product is overcosted and which product is undercosted AND briefly discuss the impact of overcosting and undercosting to the organisation. (5 marks) II O