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Blessings Inc. produces 2 types of products, Classic and Deluxe. It expects to produce 60,000 units of Classic and 90,000 units of Deluxe. Direct material cost in2020 is expected to be $35.00 per unit for Classic and S60.00 per unit for Deluxe.

Blessings total direct labour cost for Classic is expected to be $2,160,000 and S1.620.000 for Deluxe. Other manufacturing costs are considered as overhead. The estimated total annual overhead for the year is $5,355,000.

PresentlyBlessings allocates its overheads based on direct labour hours. Classic requires 2.0 direct labour hours, whilst Deluxe requires 1.0 direct labour hours per unit to complete.

The company is deciding to use the activity-based costing(ABC) system to allocate all its overheads. Blessings obtained the following information:

Cost Driver Classic Deluxe

Energy Machine Hours 40,000 160,000

Purchasing No. of orders 1 2

Mixing Mixing Hours 90,000 270,000

The company estimates that Energy costs amounts to S2,300,000; Purchasing costs amounts to $855,000;and Mixing costs amounts to $2,200,000.

Required:

(a) Calculate the total cost of Classic and total cost of Deluxe (assuming that the expected no. of units are produced) using the traditional costing system.

(b) Calculate the total cost of Classic and total cost of Deluxe (assuming that the expected no. of units are produced) using the activity-based costing system.

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