Jewel Products Ltd. is a producer of jewelry. The company uses a traditional costing system to allocate production overheads to products based on labour hours. The Managing Director tells you that it has been suggested to him that an activity based costing approach would give a better allocation of production overheads and has asked you to carry out some calculations. You have collected the following information on production overhead costs: / Production Set Up Costs 129,000 Cost of Ordering Materials 81,000 Cost of Handling Materials 35,000 Utility Costs 175,000 Details of 3 model products and actual cost information for the last period has been recorded as follows: GEMB GEMC GEME Units produced 1,000 2,000 1,000 No. of Requisitions 30 100 70 No. of Material Orders 20 30 40 No. of production runs 24 40 36 Machine hours per unit 1 1 2 Direct labour hours per unit (/20 per hour) 1 1.5 2 Direct Materials per unit /20 /30 /40 Requirement (a) Prepare a schedule showing the total production cost and the unit production cost for each of the 3 products using: (i) Traditional Absorption Costing (ii) Activity Based Costing 15 Marks (b) Comment on the relevance of both approaches.

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ANSWER To solve this problem well follow these steps a Prepare a schedule showing the total production cost and the unit production cost for each of t... View the full answer