1. Explain activity-based product costing system and how an activity-based costing system works for product costing.

2. Identify two main improvements introduced by the activity based costing system which is important for the decision making purposes.

3. The following information contains plant activity cost and drive data of a food producing company Nasstle Ltd. Based on the information you are required to calculate the activity rates.

Activity	Activity Cost (RM)	Driver	Driver Quantity
Setting up equipment	2,000	Setup hours	8
Moving materials	2,000	Number of move	20
Machining	3,000	Machine hours	100
PPacking	1,000	Direct labor hours	200

4. Using the activity rates calculated in (3), determine the unit cost for normal machine and premium machine using the following information:

Unit produces per year	Premium Machine	Normal Machine
	20	200
Prime costs	RM1,600	RM16,000
Setup hours	6	2
Number of move	12	8
Machine hours	20	80
Direct labor hours	40	160

QUESTION 2:

Required:

Calculate the costs transferred out of each department.

Assuming in the above case, instead of no beginning work for each department, each department has beginning work in progress (BWIP),

Explain the problems that may occur as a result of the presence of WIP inventories.

How should the costs and work of BWIP be treated?

Sea Travel Bhd makes travelling bags. Costs incurred during September 2020 are as follows:

Items	Amounts
Direct materials (cloth, thread, buttons and zippers)	RM240,000
Direct labor (25 workers x 400 hours x RM15)	RM150,000
Overhead	RM360,000
Number of bags produced in September	150,000 bags

Required to calculate:

Total product costs for September

The cost of one bag that was produced last month.

Total prime cost for last month.

The per-unit prime cost.

Total conversion cost for last month.

The per-unit conversion cost.