Company A is changing its costing system from traditional absorption costing (AC), based on
labour hours, to an ABC system. It has overheads of $156,000 which are related to taking
material deliveries. The delivery information about each product is given below:
Product X Y Z
Total units required 1,000 2,000 3,000
Delivery size 200 400 1,000
Total labour costs are $360,000 for 45,000 hours. Each unit of each product takes the same
number of direct hours. The company uses the number of deliveries as its cost driver.
What is the increase or decrease in unit costs for Z arising from the change from AC to
ABC?
Select one of the following:
