MamaGold Sdn Bhd is a company which produces MG1 and MG2. The company normally manufactures 4,000...

 

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MamaGold Sdn Bhd is a company which produces MG1 and MG2. The company normally manufactures 4,000 units of MG1 and 10,000 units of MG2. The direct material and direct labour costs per unit are as follows: Direct Material Direct Labour hours @ RM30 per hour Purchase order Machine set One of the management team has suggested to the company to calculate the product manufacturing cost using an Activity Based Costing (ABC) approach. The amount of manufacturing overhead is traceable to the two products as follows: Activity ups Machining Quality control Maintenance Required: Cost Driver MG1 (RM) 900 150 No of order No of set ups Machine hours No of inspectors Machine hours Manufacturing overhead cost (RM) 220,000 200,000 300,000 300,000 800,000 MG2 (RM) 500 180 Cost Driver Demanded Product WID Product WID 2 1 2,900 400 2,200 1,000 2,500 1,100 600 800 1,000 1,500 a. Calculate the total cost per unit for product MG1 and MG22 using Activity Based Costing (ABC) method. (8 marks) b. Discuss two (2) limitation of Activity Based Costing. (2 marks) MamaGold Sdn Bhd is a company which produces MG1 and MG2. The company normally manufactures 4,000 units of MG1 and 10,000 units of MG2. The direct material and direct labour costs per unit are as follows: Direct Material Direct Labour hours @ RM30 per hour Purchase order Machine set One of the management team has suggested to the company to calculate the product manufacturing cost using an Activity Based Costing (ABC) approach. The amount of manufacturing overhead is traceable to the two products as follows: Activity ups Machining Quality control Maintenance Required: Cost Driver MG1 (RM) 900 150 No of order No of set ups Machine hours No of inspectors Machine hours Manufacturing overhead cost (RM) 220,000 200,000 300,000 300,000 800,000 MG2 (RM) 500 180 Cost Driver Demanded Product WID Product WID 2 1 2,900 400 2,200 1,000 2,500 1,100 600 800 1,000 1,500 a. Calculate the total cost per unit for product MG1 and MG22 using Activity Based Costing (ABC) method. (8 marks) b. Discuss two (2) limitation of Activity Based Costing. (2 marks)

Answer rating: 100% (QA)

a To calculate the total cost per unit for product MG1 and MG2 using the Activity Based Costing ABC method we need to allocate the manufacturing overhead costs based on the cost drivers for each activ... View the full answer