Terbaik Corporation (TC) makes a single product, a hearing aid, that it sells to pharmacies around...

 

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Terbaik Corporation (TC) makes a single product, a hearing aid, that it sells to pharmacies around the area. The company has a simple Activity Based Costing (ABC) system that it uses for internal decision making. The company has two overhead departments whose costs are listed on the following page: Manufacturing overhead Selling and Administrative expenses Total overhead costs The company's ABC system has the following activity cost pools and activity measures: Activity Cost Pool Activity Measure Assembling units......... Number of units Processing orders......... Number of orders Supporting customers..... Number of customers RM450,000 240,000 RM690,000 TC distributes the costs of manufacturing and of selling and administrative overhead to the activity cost pools based on archived records, the results of which are reported below: Activity Total (RM) Assembling units Processing orders Supporting customers Manufacturing overhead (RM) 250,000 175,000 25,000 Selling & Admin Overhead (RM) 30,000 135,000 75,000 280,000 310,000 100,000 Required: 1. Compute activity rates for the activity cost pools. (3 marks) 2. One of FC's customers is Hear Well Ltd. (HWL). Last year, HWL ordered a total of 80 hearing aids during the year. HWL ordered the hearing aids four different times. Calculate the overhead cost attributable to HWLL. (6 marks) 3. The selling price of a hearing aid is RM595. The cost of direct materials is RM180 per hearing aid and direct labor is RM50 per hearing aid. What is the net income for the customer HWL? (6 marks) 4. Why are top management support and cross-functional involvement crucial when attempting to implement an ABC system? Terbaik Corporation (TC) makes a single product, a hearing aid, that it sells to pharmacies around the area. The company has a simple Activity Based Costing (ABC) system that it uses for internal decision making. The company has two overhead departments whose costs are listed on the following page: Manufacturing overhead Selling and Administrative expenses Total overhead costs The company's ABC system has the following activity cost pools and activity measures: Activity Cost Pool Activity Measure Assembling units......... Number of units Processing orders......... Number of orders Supporting customers..... Number of customers RM450,000 240,000 RM690,000 TC distributes the costs of manufacturing and of selling and administrative overhead to the activity cost pools based on archived records, the results of which are reported below: Activity Total (RM) Assembling units Processing orders Supporting customers Manufacturing overhead (RM) 250,000 175,000 25,000 Selling & Admin Overhead (RM) 30,000 135,000 75,000 280,000 310,000 100,000 Required: 1. Compute activity rates for the activity cost pools. (3 marks) 2. One of FC's customers is Hear Well Ltd. (HWL). Last year, HWL ordered a total of 80 hearing aids during the year. HWL ordered the hearing aids four different times. Calculate the overhead cost attributable to HWLL. (6 marks) 3. The selling price of a hearing aid is RM595. The cost of direct materials is RM180 per hearing aid and direct labor is RM50 per hearing aid. What is the net income for the customer HWL? (6 marks) 4. Why are top management support and cross-functional involvement crucial when attempting to implement an ABC system?