Design Tree Ltd manufactures customized wooden furniture. The following information is available for two of...
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Design Tree Ltd manufactures customized wooden furniture. The following information is available for two of their products: Rectangle dining table Artistic coffee table Selling price per unit $200 $175 Direct material per unit $50 $35 Direct labour per unit $30 $30 Units produced and sold 10 000 18 000 The total number of activities for each of the two products during the period are as follows: Rectangle dining table Artistic coffee table Number of purchase requisitions 1 200 2 000 Number of set-ups 240 300 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 each of the product using activity-based costing. (6 points) (b) Explain two (2) reasons when it is not useful to incorporate activity-based costing in a company (4 points)
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