QUESTION $3$

$(20$ MARKS$)$

REQUIRED

Study the information provided below and calculate the following:

$3\mathrm{.}1$

The unit manufacturing cost per product using the traditional absorption costing system.

$(8$ marks$)$

$3\mathrm{.}2$

The manufacturing overhead cost per product using the Activity$-$Based Costing system. $($Your answer must include the calculations of the activity rates.$)$

$(12$ marks$)$

INFORMATION

Jupiter Ltd manufactures two products, viz. Product X and Product Y$.$ The company used the absorption costing system by gathering all the overheads in a single cost centre and then allocating it to products using direct labour as allocation basis. The enterprise intends changing to the Activity$-$Based Costing $($ABC$)$ system. The budgeted information for $2025$ is as follows:

Costs

Product X

Product Y

Total

R

R

R

Direct materials cost

$1000000$

$2000000$

$3000000$

Direct labour costs

$500000$

$1500000$

$2000000$

Manufacturing overheads:

Machine set$-$ups

$400000$

Design costs

$600000$

Materials handling

$100000$

Materials procurement

$80000$

Operating information

Product X

Product Y

Purchase orders for materials

$70$ orders

$30$ orders

Materials usage

$6000$ metres

$4000$ metres

Units manufactured

$5000$ units

$20000$ units

Machine set$-$ups

$120$ set ups

$80$ set ups

Design hours

$3000$ hours

$12000$ hours