Engineering cost analysis

ABW 30 2 5 4 7 3 2 The following budgeted information relates to Brunti Inc. for the forthcoming period: Products XYI YZT (000) (000) (000) Sales and production (units) 50 40 ($) ($) ($) Selling price (per unit) 45 95 73 Prime cost (per unit) 32 84 65 Hours Hours Hours Machine department (machine hours per unit) 5 Assembly department (direct labour hours per unit) 2 Overheads allocated and apportioned to production departments (including service cost centre costs) were to be recovered in product costs as follows Machine department at $1.20 per machine hour Assembly department at $0.825 per direct labour hour You ascertain that the above overheads could be reanalyzed into cost pools' as follows. Quantity for the Cost pool 5000 Cost driver period Machining services 357 Machine hours 420 000 Assembly services 318 Direct labour hours 530 000 Set-up costs 26 Set-ups 520 Order processing 156 Customer orders 32 000 Purchasing 84 Suppliers orders 11 200 941 You have also been provided with the following estimates for the period. Products XYI YZT ABW Number of set-ups 120 200 200 Customer orders 8 000 8000 16 000 Suppliers' orders 3 000 4000 4200 Required: (a) Prepare and present profit statements using (0) conventional absorption costing (5 marks) (ii) activity-based costing (10 marks) (b) Comment on why activity-based costing is considered to present a fairer valuation of the product cost per unit. (5 marks) (Total 20 marks)