Yaqulz Company produces two different products ? Product A and Product B ? with the following prime cost per unit information. Yaqulz uses a traditional volume?based costing system in which direct labour hours are the allocation base. The estimated manufacturing overhead costs and the direct labour hours for the year are $400,000 and 100,000 hours respectively. The company gathered the following information on the two products.

Yaqulz is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Setup, Production, and Finishing. The cost of each activity and usage of the activity drivers are as follows:

Yaqulz manufactures 10,000 units of Product A and 5,000 units of Product B per month.

(a) Using the traditional costing system, calculate the product cost per unit for both Product A and Product B.

(b) Using the Activity Based Costing system, calculate the estimated product cost per unit for Product A and Product B.

(c) Compare the costs of Product A and Product B under a traditional and an activity based costing system. Explain why the traditional and the activity based

costing system differ in the cost of Product A and Product B.

Product A Product B 24.00 120.00 144.00 $200.00 Direct Materials Direct Labour (8DLH @$15; 4DLH@$15) 48.00 60.00 108.00 $150.00 Total prime cost Sales price