Harambee Ltd makes three main products, using broadly the same production methods and equipment for all the three products. A conventional product costing system is used at present although activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Labour hours per unit Machine hours per unit Materials per unit (N$) Volume (Units) Product X 0,5 1,5 20 750 Product Y 1,5 1 12 1 250 Product Z 1 3 25 7 000 Direct labour costs are N$6 per hour. Production overhead are absorbed on a machine hour basis with the rate for the period set at N$28 per machine hour. Further analysis shows that the total of production overheads may be divided as follows: Page 23 of 27 Percentage (%) Set-up costs 35 Costs relating to machinery 20 Material handling cost 15 Inspection cost 30 Total production overhead 100 The following activity levels are associated with the product lines for the whole financial period. Number of set-ups Number of times materials are moved Number of inspections Product X 75 12 150 Product Y 115 21 180 Product Z 480 87 670 Required Marks 1.1 Calculate the cost per unit for each product using conventional costing methods. 7 1.2 Calculate the cost per unit for each product using ABC principles. 20 1.3 Comment on the reasons for any differences in the two costs calculated for each product line. 3