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The company ABC produces a battery of X (3000 mAh)- for mobile phone & Y (15000 mAh) for power bank. Regular practice includes a normal cost system and a plant-wide overhead rate based on direct labour hours for allocating overhead costs. It is recommended to use activity-based costing to charge overhead by consultants.

The company expects to produce 5,000 batteries of X type and 3,000 batteries of Y type in 2018. Each X requires one direct labour hours to produce and each Y requires two hours to produce.

For production of batteries, the cost incurred is as follows:

Item (per unit)	X	Y
Direct Material	$ 10	$ 20
Direct Labour	$ 3	$ 7

Estimated total Factory Overhead Data For 2018:

Activity	Overhead ($)	Volume Level
Production Setups	$ 70,000	15 Set ups
Material Handling	$ 50,000	1000 lbs
Packaging and Shipping	$ 90,000	500 packs
Total Factory Overhead	$ 210,000

Based on above analysis, following activities were estimated:

Activity	X	Y
Manufacturing Setups	5 setups	10 setups
Material Management	400 lbs	600 lbs
Packaging & transport	200 packs	300 packs

Based on the above data,

1. Using the plant-wide rate based on direct labour hours, calculate the cost of each product

2. Calculate the activity cost rates for setups, material management and packaging & transport.

3. Cost out the two products using an activity-based costing.

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