Candy House Limited manufactures several types of candy and snacks. The following information is available...
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Accounting
Candy House Limited manufactures several types of candy and snacks. The following information is available for three of their products: A B C Selling price $200 $183 $175 per unit Direct material $50 $40 $35 per unit Direct labour $30 $35 $30 per unit 10 000 15 000 18 000 Units produced and sold The total number of activities for each of the three products of the period is as follows: A B 1 200 1 800 2 000 Number of purchase requisitions Number of set-ups 240 260 300 Overhead costs have been analyzed as follows: Inspecting quality assurance (cost driver is number of purchase requisitions) $1 400 000 Production scheduling and machine set-up (cost driver is number of set-ups) $1 200 000 Required (show your workings for calculations & write in your own words): (a) Calculate the profit for product B using activity-based costing. (6 points) (b) Although Activity-based costing is often recommended in textbooks, there are actually very few companies that uses it as its main method. Explain two (2) reasons for this. (4 points)
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