ACCA F5一日一练

   The   Gadget   Co   produces   three   products,   A,   B   and   C,   all   made   from   the   same   material.   Until   now,   it   has   used
     traditional absorption costing to allocate overheads to its products. The company is now considering an activity based
     costing system in the hope that it will improve profitability. Information for the three products for the last year is as
     follows:
    

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      Required:
     (a)   Calculate the full cost per unit for products A, B and C under traditional absorption costing, using direct
           labour hours as the basis for apportionment.                                                                        (5 marks)
     (b)   Calculate the full cost per unit of each product using activity based costing.                                      (9 marks)
     (c)   Using your calculation from (a) and (b) above, explain how activity based costing may help The Gadget Co
           improve the profitability of each product.                                                                          (6 marks)