Activity Cost Driver Allocation Rate
Material handling Number of parts $2 per part
Assembly Labour hours $20 per hour
Inspection Inspection time $3 per minute (i) What is the overhead cost per unit from a batch of 1000 sharpeners using the traditional method? The batch requires 2000 parts 20 direct labour hours and 30
minutes of inspection time (2 marks) (Show all workings).
(ii) What is the overhead cost per unit from a batch of 1000 sharpeners using the ABC method? (3 marks) (Show all workings)
(iii) Many companies that have previously applied overhead costs to final products using Direct Labour hours as the cost driver have changed to other cost drivers
such as machine hours. Why? (3 marks)