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Q 4) BLIT Company produces two automobile antitheft devices. BLIT Boot: a high volume item...

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Q 4) BLIT Company produces two automobile antitheft devices. BLIT Boot: a high volume item and BLIT Club: a low volume item. Sales (Numbers) Direct labour hour per unit Direct labour cost per unit Direct Materials per unit BLIT Boot 25000 1 $ 12 $ 40 BLIT Club 5000 1 $ 12 $ 30 Expected annual manufacturing overhead costs $900,000 The company wants to evaluate the traditional costing system based on direct labour hours with activity based costing system. The activity cost pools, estimated activity and cost drivers are given in the following table. Activity cost pools Estimated Cost drivers Expected use of overheads Cost drivers per activity Setting up machines $300000 Number of setups 1500 setups Machining 500000 Machine hours 50000 machine hours Inspecting 100000 Number of 2000 inspections inspections Total $900000 Cost drivers Number of setups Machine hours Number of inspections Expected use in BLIT Boot 500 30000 500 Expected use in BLIT Club 1000 20000 1500 a. Calculate unit costs under traditional direct labour hour based costing? (3 marks) b. Calculate unit costs under ABC? (4 marks) c. Compare the unit costs under the two methods and comment on the differences. Which method do you suggest BLIT should adopt

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