Refined Reflections $($Pty$)$ Ltd $($Refined Reflections$)$ manufactures skin products. Due

to the recent demand in natural cosmetic products, Refined Reflections started to

produce two varieties of unique face cream using tea tree oil. The products, which go

by the names $"$T$.$TreeZap" and $"$T$.$TreeCure," are offered in small bottles. Refined

Reflections presently employs a traditional product costing system for its intricate

manufacturing process, but management is considering switching to an activity$-$based

costing system.

The product details are as follows:

T$.$TreeZap T$.$TreeCure

Labour hours per unit $11$

Machine hours per unit $31$

Material cost per unit R$25$ R$12$

Direct labour cost per hour R$6$ R$6$

Volumes produced $($units$)70001250$

Selling price per unit R$150$ R$140$

Production overheads are absorbed on a machine hour basis and the rate is R$28$ per

machine hour. Machinery cost is allocated based on machine hours. Total production

overheads can be allocated to the following activity centres:

$$ Material handling $-15\%$

$$ Machinery $-20\%$

$$ Set$-$ups $-35\%$

$$ Inspections $-30\%$

The activity volumes for the two products were as follows:

T$.$TreeZap T$.$TreeCure

Number of set$-$ups $480115$

Number of movements of material $8721$

Number of inspections $670180$REQUIRED:

$1\mathrm{.}1.$ Calculate the total gross profit for both products, T$.$TreeZap and T$.$TreeCure,

using the activity$-$based costing system.

Round your answers to two decimal places where required.

$(24$ marks$)$

$1\mathrm{.}2.$ Briefly explain why an activity$-$based costing system may produce more

accurate product costs than a traditional absorption costing system.

$(4$ marks$)$