Advanced Toys Limited manufactures and sells three models of digital toy games for children. Relevant sales...

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Advanced Toys Limited manufactures and sells three models of digital toy games for children. Relevant sales and cost information are extracted below: Premium Advanced Basic Sales units 5,000 20,000 50,000 Selling price per unit 180.00 150.00 110.00 Direct costs per unit: Direct material $22.50 Direct labour 15.00 $15.00 12.00 $7.50 8.00 The direct labour wage rate is $20 per hour. Manufacturing overhead is applied on the basis of direct labour hours. The estimated total manufacturing overhead is $2,860,000. The company is planning to implement the activity-based costing system and the management accountant has analysed the manufacturing overhead costs based on activities identified and collected the relevant activity data from the production manager as shown below: Activities Total overhead Premium Activity level Advanced Basic Engineering (Engineering hours) Quality control (Inspection hours) $840,000 900 hrs 375 hrs 225 hrs 951,000 5,000 hrs 10,000 hrs 15,000 hrs Machinery (Machine hours) Materials handling (DM costs) 544,000 640 hrs 2,100 hrs 2,700 hrs 525,000 $112,500 $300,000 $375,000 Total $2,860,000 Required: Determine the gross margin per unit for each model of the products and advise the management which model is most profitable and which model is least profitable under the following two costing systems: (a) Traditional costing system (b) Activity-based costing system Advanced Toys Limited manufactures and sells three models of digital toy games for children. Relevant sales and cost information are extracted below: Premium Advanced Basic Sales units 5,000 20,000 50,000 Selling price per unit 180.00 150.00 110.00 Direct costs per unit: Direct material $22.50 Direct labour 15.00 $15.00 12.00 $7.50 8.00 The direct labour wage rate is $20 per hour. Manufacturing overhead is applied on the basis of direct labour hours. The estimated total manufacturing overhead is $2,860,000. The company is planning to implement the activity-based costing system and the management accountant has analysed the manufacturing overhead costs based on activities identified and collected the relevant activity data from the production manager as shown below: Activities Total overhead Premium Activity level Advanced Basic Engineering (Engineering hours) Quality control (Inspection hours) $840,000 900 hrs 375 hrs 225 hrs 951,000 5,000 hrs 10,000 hrs 15,000 hrs Machinery (Machine hours) Materials handling (DM costs) 544,000 640 hrs 2,100 hrs 2,700 hrs 525,000 $112,500 $300,000 $375,000 Total $2,860,000 Required: Determine the gross margin per unit for each model of the products and advise the management which model is most profitable and which model is least profitable under the following two costing systems: (a) Traditional costing system (b) Activity-based costing system