6. Pintu Manufacturing produces two types of gates: Deluxe and Standard. The assignment basis for support...

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6. Pintu Manufacturing produces two types of gates: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2020, Pintu compiled the following data for the two products: Sales units Sales price per unit Direct material and labor costs per unit Manufacturing support costs per unit Deluxe RM50.000 Standard RM400,000 RM650.00 RM475.00 RM180.00 RM130.00 RM120.00 RM 80.00 Last year, Pintu Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The Finance Director suggested that an Activity Based Costing (ABC) analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. He obtained the following ABC information for 2020: Activity Setups Packing Cost Driver of setups Cost Total Deluxe Standard RM500,000 500 400 100 Machine-related of machine hours RM44,000,000 600,000 300,000 300,000 of shipments RM5,000,000 250,000 50,000 200,000 1. Differentiate between "line management" and "staff management" when dealing with financial decisions. [10 marks] 2. Explain why the process of identifying "cost drivers" must be done carefully for more accurate cost estimation. [10 marks] 3. Identify and explain the four levels of cost hierarchy in an Activity Based Costing system. [10 marks] 4. Explain the benefits of Activity Based Budgeting to managers. [10 marks] 5. Provide the benefits of using "absorption costing" when reporting of company performance. [10 marks] Required: a) Using the current system, calculate the estimated 1. total cost of manufacturing one unit for each type of door. 2. profit per unit for each type of door. [10 marks] [10 marks] b) Explain why estimated manufacturing overhead costs per unit are less for the deluxe door (RM80 per unit) than the standard door (RM120 per unit) under the current system. [5 marks] c) Explain why total machining hours for the deluxe gates (300,000 hours) are the same as for the standard gates (300,000 hours). [5 marks] d) Using the activity-based costing data presented above, (i) compute the cost-driver rate for each overhead activity. [5 marks] (ii) compute the revised manufacturing overhead cost per unit for each type of entry door. (iii) compute the revised total cost to manufacture one unit of each type of entry door. (iv) Explain whether the deluxe door as profitable as the original data estimated. [5 marks] [5 marks] [5 marks] 6. Pintu Manufacturing produces two types of gates: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2020, Pintu compiled the following data for the two products: Sales units Sales price per unit Direct material and labor costs per unit Manufacturing support costs per unit Deluxe RM50.000 Standard RM400,000 RM650.00 RM475.00 RM180.00 RM130.00 RM120.00 RM 80.00 Last year, Pintu Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The Finance Director suggested that an Activity Based Costing (ABC) analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. He obtained the following ABC information for 2020: Activity Setups Packing Cost Driver of setups Cost Total Deluxe Standard RM500,000 500 400 100 Machine-related of machine hours RM44,000,000 600,000 300,000 300,000 of shipments RM5,000,000 250,000 50,000 200,000 1. Differentiate between "line management" and "staff management" when dealing with financial decisions. [10 marks] 2. Explain why the process of identifying "cost drivers" must be done carefully for more accurate cost estimation. [10 marks] 3. Identify and explain the four levels of cost hierarchy in an Activity Based Costing system. [10 marks] 4. Explain the benefits of Activity Based Budgeting to managers. [10 marks] 5. Provide the benefits of using "absorption costing" when reporting of company performance. [10 marks] Required: a) Using the current system, calculate the estimated 1. total cost of manufacturing one unit for each type of door. 2. profit per unit for each type of door. [10 marks] [10 marks] b) Explain why estimated manufacturing overhead costs per unit are less for the deluxe door (RM80 per unit) than the standard door (RM120 per unit) under the current system. [5 marks] c) Explain why total machining hours for the deluxe gates (300,000 hours) are the same as for the standard gates (300,000 hours). [5 marks] d) Using the activity-based costing data presented above, (i) compute the cost-driver rate for each overhead activity. [5 marks] (ii) compute the revised manufacturing overhead cost per unit for each type of entry door. (iii) compute the revised total cost to manufacture one unit of each type of entry door. (iv) Explain whether the deluxe door as profitable as the original data estimated. [5 marks] [5 marks] [5 marks]