0 Question 2 Part A (5 marks) 25 pts What are the main differences between activity-based costing (ABC) and traditional product costing? What assumptions must be met for ABC costing to be useful? Part B (20 marks) Manly Paradise Ltd manufactures two products - Shampoo and Conditioner - and applies manufacturing overhead to all units at the rate of $2 per machine hour. Production information follows. Shampoo Conditioner Direct material cost $5 $9 Direct labour cost $3 $3 Budgeted volume(units) 8,000 20,000 ncements s ments ons The management accountant has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing and product packaging. The products' use of cost driver related to each activity is estimated to be as follows: Shampoo Conditioner Total Manufacturing Setups (hours) 50 30 80 Machine processing (hours) 16,000 20,000 36,000 dings Product packaging (units) 800 600 1400 The firm's total overhead of $72,000 is subdivided as follows: manufacturing setups $40,000; machine processing $18,000; and product packaging $14,000. Required: 1. Calculate the unit manufacturing cost of Shampoo and Conditioner by using the company's current overhead costing procedures. (6 marks) 2. Calculate the unit manufacturing cost of Shampoo and Conditioner by using activity-based costing. (10 marks) 3. Is the cost of Shampoo overstated or understated by the use of machine hours to allocate total manufacturing overhead to production? If so, by how much? (4 marks) Edit View Insert Format Tools Table 12pt Paragraph V BIUA 20