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Question 1 (30 Marks) Harambee Lid makes three main products, using broadly the same production methods and equipment for all the three products. A conventional product costing system is used at present although activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Labour hours Machine hours Materials per Volume (Units) per unit per unit unit (N$ Product X 0,5 1,5 20 750 Product Y 1,5 1 12 1 250 Product Z 1 3 25 7 000 5.5 Direct labour costs are N$6 per hour. Production overhead are absorbed on a machine hour basis. Further analysis shows that the total of production overheads may be divided as follows: Page 22 of 27 Set-up costs Costs relating to machinery Material handling cost Percentage (%) Inspection cost Total production overhead 30 100 The following activity levels are associated with the product lines for the whole financial period. Number of set-ups Number of times Product X Number of 75 materials are moved inspections Product Y Product Z 115 12 480 21 150 180 670 Required Marks 1.1 Calculate the cost per unit for each product using conventional costing methods. 1.2 Calculate the cost per unit for each product using ABC principles. 20 1.3 Comment on the reasons for any differences in the two costs calculated for 3 each product line