Question $3$

The company manufactures two products: the Basic model and the Superior model. Data regarding the two

models are as follows:

The company is considering the use of activity$-$based costing to apply overheads and has identified the

following separate activity centres.

Required:

a$)$ Calculate the overhead rate based on traditional overhead allocation with machine hours as the cost

driver.

b$)$ Determine the total cost to produce one unit of each type of model by using the overhead rate calculated

in requirement a above.

c$)$ Calculate the overhead rate for each activity using the activity$-$based costing method.

d$)$ Determine the total cost to produce one unit of each model by using the overhead rates calculated in

requirement $c$ above.