Total 90 Question 1 (30 Marks) Harambee Ltd 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 presenti although activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Volume (Units) Labour hours per unit 0,5 1,5 Machine hours per unit Materials per unit (N$) 20 750 Product X Product Y Product z 1 250 7 000 25 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 Percentage (%) 35 Set-up costs Costs relating to machinery Material handling cost Inspection cost Total production overhead 15 30 100 The following activity levels are associated with the product lines for the whole financial period. Number of set-ups Number of times materials are moved Product X Product Y Product Z 75 115 480 Number of inspections 150 180 670 87 Marks Required 1.1 Calculate the cost per unit for each product using conventional costing methods .2 Calculate the cost per unit for each product using ABC principles. 1.3 Comment on the reasons for any differences in the two costs calculated for each product line