Duo plc produces two products, A and B. Each has two components specified as sequentially numbered parts, i.e. product A (parts 1 and 2) and product B (parts 3 and 4). Two production departments (machinery and fitting) are supported by five service activities (material procurement, material handling, maintenance, quality control and set up). Product A is a uniform product manufactured each year in 12 monthly high volume production runs. Product B is manufactured in low volume customized batches involving 25 separate production runs each month. Additional information is as follows:

(£000s
Material handling ............................................. 1500
`Material procurement ......................................... 2000
Set-up ........................................................... 1500
Maintenance ....................................................2500
Quality control ................................................. 3000
Machinery (machinery power, depreciation etc.)b......... 2 500
Fitting (machine, depreciation, power etc.)b ...............2 000
aIt may be assumed that these represent fairly homogeneous activity-based cost pools.
bIt is assumed these costs (depreciation, power etc.) are primarily production volume driven and that direct labour hours are an appropriate surrogate measure of this.

You are required to compute the unit costs for products A and B using (i) a traditional volume-based product costing system and (ii) an activity-based costing system.

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Product A Product B Production details: Components Annual volume produced Annual direct Parts 1, 2 300 000 units Parts 3, 4 300000 units labour hours: Machinery department Fitting department 500 000 DLH 150 000 DLH 600 000 DLH 200000 DLH Overhead cost analysis Cost driver analysis Annual cost driver Volume per component Part 1 Part 2 Part 3 Part 4 Cost driver Material movements Number of orders Number of set-ups 180 200 300 2000 4000 160 1000 1200 300 7000 5000 10000 8000 360 2 400 1000 Direct labour hours 150000 350000 200000 400000 50000 100000 60 000 140000 12 12 300 Maintenance hours Number of inspections 360 Direct labour hours