Question $1$

Max Auto Products $($MAP$)$ is an automotive component supplier. MAP has been

approached by Yikes Motors $($YM$)$ to consider expanding its production of Part X to a

total annual quantity of $2,000$ units. Part X is a low$-$volume, complex product with a

high gross margin that is based on a proposed unit sales price of RM$7\mathrm{.}50.$ MAP uses a

traditional costing system that allocates indirect manufacturing costs $($i$.$e$.$ annual

overhead of RM$3,200,000)$ based on $400\%$ of direct labour costs. The production of

$2,000$ units of Part X requires RM$5,000$ of direct materials and RM$1,000$ of direct labour.

The data for $2,000$ units of Part $x$ based on the traditional costing system are computed

and shown below:

The management of MAP decided to examine the effectiveness of their traditional

costing system versus an activity$-$based costing $($ ABC $)$ system. The following data have

been collected by a team consisting of accounting and engineering analysts: