Test your understanding 4

　　Cabal makes and sells two products, Plus and Doubleplus. The direct costs of production are $12 for one unit of Plus and $24 per unit of Doubleplus.

　　Information relating to annual production and sales is as follows:

　　PlusDoubleplus

　　Annual production and sales24,000 units24,000 units

　　Direct labour hours per unit1.01.5

　　Number of orders10140

　　Number of batches12240

　　Number of setups per batch13

　　Special parts per unit14

　　Information relating to production overhead costs is as follows:

　　Cost driverAnnual cost

　　Setup costsNumber of setups73,200

　　Special parts handlingNumber of special parts60,000

　　Other materials handlingNumber of batches63,000

　　Order handlingNumber of orders19,8000

　　Other overheads-216,000

　　Other overhead costs do not have an identifiable cost driver, and in an ABC system, these overheads would be recovered on a direct labour hours basis.

　　(a) Calculate the production cost per unit of Plus and of Doubleplus if the company uses traditional absorption costing and the overheads are recovered on a direct labour hours basis.

　　(b) Calculate the production costs per unit of Plus and of Doubleplus if the company uses ABC.