a) ABC Method , calculate OH p/unit for ice skates

b) Product cost p/unit

Sporty Ltd. manufactures high quality shoe products. The company has been using a conventional product costing system that applies overhead using a single cost driver (Direct Labour Cost). This was considered to be reasonably accurate for its two products (Running, Soccer). However, the company has introduced a new product (Ice-Skates) that has increased production complexity, uncertainty in customer demand, and is expected to have more intense use of indirect costs. The company is considering adopting Activity Based Costing (ABC) and had prepared the following information about the four activities in the manufacturing plant and their budgeted overhead costs for the upcoming month: Activity Information: Activity Budgeted Overhead Cost ($) Activity Driver Machine Hours Machining $45,000 Assembly Direct Labour Hours $80,000 Machine Setup Number of batches $20,000 Packaging Number of boxes $6,500 Total Budgeted Overhead Cost ($) $151,500 Below is the budgeted production information about their three products for the upcoming month: Budgeted Production Information: Ice-Skates Running Soccer Direct materials (per unit) $30 $15 $20 Direct labour hours (per unit) 0.60 0.25 0.30 Machine hours (per unit) 0.50 0.20 0.25 Production (units) 1000 6000 5000 50 100 Batch size (units) 100 60 80 Box size (units) 25 Direct labour rate is $30 per hour