2 a) Provide two reasons for an outdated costing system. (2 marks) ANSWER a): (11 marks) b) PICO Ltd is a manufacturer of picnic tables of varying sizes. It is considering switching to the ABC system. As its management accountant, identify two (2) potential activity-based costing pools for PICO Ltd and their appropriate cost drivers? (4 marks) ANSWER b): c) Kula Company Ltd manufactures two products, Flora and Fauna. Estimates for the company's products for next year are provided below: Flora Fauna Estimated production volume 3 000 4 000 Direct material cost $60 / unit $90 / unit Direct labour per unit 3 hours @ $25/hour 4 hours @ $25/hour Kula's estimated overhead of $1 500 000 can be identified with three major activities: order processing ($280 000), machine processing ($1 020 000) and product inspection ($200 000). These activities are driven by the number of orders processed, machine hours, and inspection hours, respectively. Estimated activity levels for the next year are as follows: Flora Fauna Total Orders processed 500 300 800 Machine hours Inspection hours 39 000 46 000 85 000 7 000 18 000 25 000 Required: Assuming that Kula Company Ltd uses activity-based costing to apply overhead to production, HI5017 Final Assessment T3 2021 calculate the unit manufacturing costs of the Flora and Fauna products if the estimated manufacturing volume is attained. (5 marks) ANSWER C)