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Kamaljeet Manufacturing produces two products, A and B. Data relating to the two products follow:...

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Accounting

Kamaljeet Manufacturing produces two products, A and B. Data relating to the two products follow:

Product A Product B
Direct Material 82 32
Direct Labour (@$20/h) 60 80

Normal Capacity:

Product A: 5,000 units and Product B 10,000 Units

The company has always used direct labour hours as the base for applying factory overhead costs to products.

The company has identified 4 separate activities as follows:

Activity Centre Traceable Total no. of Product A Product B
Costs events
Machine Setups 448,518 310 187 123
Purchasing costs 560,648 709 496 213
Computer processing 336,389 311 162 149
General Factory 897,036 16659 8245 8414
Total Overhead 2,242,591

(a) Using the traditional method, calculate the POHR and the cost to produce one unit of each product

(b) Assume the company adopts ABC, calculate the overhead rate for each cost driver, the amount of overhead to allocate to each product and the cost to produce one unit of each product

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