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Transport Ltd wishes to compare its product costs using traditional product costing and activity-based costing. The company makes two products: the Bike and the Scooter. There are the following details of the overheads and cost drivers:
You have the following information about the products:
A calculation of total product costs per unit for each product using:
a. Traditional total absorption costing, recovering overheads using direct labour hours.
b. Activity-based costing using the different cost drivers to allocate the cost to each product.
c. Advise management which system to use to allocate the overhead costs to their products.
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