xyz company designs and produces car parts. GTC's previous simple job costing system had two direct cost categories (direct materials and direct labour) and a single indirect cost pool (manufacturing overhead). The pre-determined overhead rate of the simple system for 2020 would have been $250 per direct labour hour.

Recently, xyz develops a new activity-based costing system. Under the new system, the two direct cost categories remain unchanged. The single indirect cost pool is replaced by five activity pools. Pertinent data for the year 2020 are as follows:

Activity pool Activity driver Cost per activity driver

Material handling Number of parts $0.80 per part

Lathe work Number of lathe turns $0.40 per turn

Milling Number of machine hours $40.00 per hour

Grinding Number of parts $1.60 per part

Testing Number of units produced $30.00 per unit

Two jobs completed in 2020 had the following characteristics:

	Job AV	Job BZ
Direct material cost	$19,400	$119,800
Direct labour cost	$1,500	$22,500
Direct labour hour	25	375
Parts	500	2,000
Lathe turns	20,000	60,000
Machine hour	150	1,050
Number of units	10	200

Required

1. Calculate the manufacturing cost per unit for each job under the previous simple job costing system. (3 marks)

1. Calculate the manufacturing cost per unit for each job under the new activity-based costing system. (5 marks)

1. Why does the manufacturing cost per unit for each job under the previous and new costing systems differ from each other? Explain. (2 marks)