Question 2 (24 marks) Advanced Electronic Company is a chipset maker manufactures and sells a varicty of integrated circuit (1C) products. The company has three key product lines accounting for 90% of the total business. Revenue and cost data ofthe three product lines in the month of April are as follows: Model-I Model-2 Model-3 Units produced and sold Unit selling price Direct materials Direct labor Machine hours consumed 4,000 S60 $70,000 $60,000 300 hours $160,000 $70,000 90 hours 10,000 S35 $182,000 $84,000 60 hours The company adopts a simple costing system by allocating the manufacturing overhead based on the machine hours which are used to manufacture the three models. Manufacturing overhead incurred in the month includes the following Engincering Quality control Machinery Materials handling 62,500 15,000 36,500 180,000 Recently the company has leamed that an activity-based costing (ABC) system can provide more accurate cost information through analysing how the products use the activities during the operating processes. The following data are collected from operations for April: Activity Cost Driver Model-1 Model-2 Model-3 No. of engineering hours No. of inspection hours No. of machine hours No. of orders 60 Quality control Machinery Materials handling 100 120 90 240 204 60 20 Required: (a) Use the current simple costing system to prepare a product line and total 5 marks) company income statement with profitability % for the month of April. (b) Use the activity based costing system to prepare the product line and 8 marks) total company income statement with profitability % for the month of April. Show all your workings (c) Compare and explain differences in product costs under the product (7 marks) costing systems in (a) and (b) above. What are the implications for the company's pricing strategy? (d) Identify four benefits that activity-based costing system would bring to 4 marks) the company