Breakdown Cost Drivers: QUESTION 3: GAMMA LTD Gamma Ltd makes shoes in two ranges such as Basic and Deluxe. Information relating to each of these products is set out below: Basic Deluxe Number of Quality Inspections each year 400 600 Basic Deluxe Selling price per unit 120 310 Number of sales invoices issues each year 1.000 3,000 Material cost per unit 30 120 Labour time per unit 2 hour 6 hours Labour rate per hour 10 10 Required: A) Calculate the total cost per unit and profit per unit for each product using: - the traditional full cost method of overhead absorption (based on labour hours) - the activity-based costing (ABC) method. B) Comment on your findings. Annual sales volume 1,000 units 2,000 units The Director of Gamma Ltd has produced the following analysis of total overheads per year and their relevant cost drivers: Type of overhead Cost driver Quality Inspections Number of quality inspections 80,000 Sales invoicing costs Number of invoices issued 32.000 All other overheads Labour hours 168,000 Total overhead costs 280.000