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m ale Question 2. Tablescape Decorations Ltd. produces three distinct products and sells them in bulk to smaller retailers. Its managers are concerned that the company's profit is not as high as its competitors. They believe they fall in profits could be caused due to the company's uncompetitive selling price(s), for one or more product, and losses on other products. Details of the company's costs and selling prices are as follows: Product Voven Table Napkin Selling Price 20 45 62 Direct Costs Labour 6 10 20 Direct Material -brass wire 12 Direct Material - other 4 20 18 Total Direct Cost 10 30 50 Units produced 5,000 6,000 6,500 Labour Hours 1 hour per unit 2 hour per unit 2 hour per unit Currently the company uses the traditional method of allocating indirect overheads but is considering using the ABC method for increasing the accuracy. The company's indirect overheads are as follows: E Depreciation 25,000 Purchasing Expenses 20,000 Direct Material -brass wire inspection costs 6,000 Direct Material - other delivery inspection costs 9,000 Set-up costs 9,000 Canteen expenses 6,000 Activities associated with the overheads are: - Woven Placemats Table Runner Napkin Rings Number of suppliers 6 2 2 Component deliveries per month 4 4 2 Production runs per month 10 15 20 No. of employees 20 10 20 Value of machinery 15,000 10,000 15,000 Required: - a) Calculate the profit per unit for the three products based on the company's current Labour Hours based overhead method. (5 Marks) Continued on next page b) Calculate the profit per unit for the three products using the principles of ABC. Explain your (15 Marks) TOTAL MARKS = 20

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