product costing

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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:

Required:

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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