CIMA Stage 4 Management Accounting Control Systems IM5.4 Intermediate: Calculation of ABC product costs and a discussion of the usefulness of ABC. Trimake Limited makes three main products, using broadly the same production methods and equipment for each. A conventional product costing system is used at present, although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Hours per unit Materials Labour Machine per unit Volumes hours unit (R) units Product X 1/2 12 20 750 Product Y 112 1 12 1,250 Product Z 1 103 25 7,000 Direct labour costs R42 per hour and production overheads are absorbed on a machine hour basis. The rate for the period is R84 per machine hour. Mad ASSESSMENT MATERIAL 147 Required: (a) Calculate the cost per unit for each product using conventional methods. (4 marks) Further analysis shows that the total of production overheads can be divided as follows: (%) Costs relating to set-ups 35 Costs relating to machinery 20 Costs relating to materials handling 15 Costs relating to inspection 30 Total production overhead 100% The following activity volumes are associated with the product line for the period as a whole. Total activities for the period: Number of Number of movements Number of set-ups of materials inspections Product X 75 12 150 Product Y 115 21 180 Product Z 480 87 670 670 120 1,000 (b) Calculate the cost per unit for each product using ABC principles. (15 marks) (c) Comment on the reasons for any differences in the costs in your answers to (a) and (b). (3 marks) CIMA Stage 3 Management Accounting Techniques IM5.5 Advanced: Comnen.