using the activity based costing system determine the activity cost driver rate for each activity and calculate the total manufacturing costs for the two product

Question 4 (20 marks) ABC Lid manufactures two products: Basic and Deluxe. The company expects to produce and sell 1,100 units of Basic and 1,600 units of Deluxe during the current year. Currently in the traditional costing system, the company has been using direct labour hours as the single cost driver for allocation of manufacturing overheads to products. The budgeted manufacturing overheads for the next period are $35,000. The company is considering to implement the activity-based costing (ABC) system. The accountant has analysed the budgeted production overheads and identified various costs in activity centres with appropriate cost drivers: Activity Centre Costs Cost Driver Maintenance costs $7.000 Direct labour hours Set up costs $12,000 Number of production run Quality inspections $7,020 Number of inspections Stores receiving $3.480 Number of component deliveries Stores issues $5.500 Number of issues $35.000 The analysis also revealed the following information: Basic Deluxe Direct materials cost per unit $50 $35 Direct labour cost per unit $30 $45 Direct labour hours per unit 2 3 Number of production run 10 40 Number of inspections 20 80 Number of component deliveries 492 900 Number of issues from stores 400 7,000 Required