Required:

(b) Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door (RM 80 per unit) than the standard door (RM 120 per unit). Provide a short explanation for this phenomenon. [3 marks]

(c) ABC systems may result in misallocation of indirect costs." Justify with reasons whether you agree with the above statement. [5 marks]

(d) Provide the considerations that need to be examined when determining a sales mix strategy. [5 marks]

(e) While implementing an ABC system for the first time, achieving a significant change overnight is difficult and this may demotivate employees. Suggest ways managers overcome this problem. [5 marks]

Lampung Sdn Bhd produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2015, Lampung compiled the following data for the two products: Deluxe Standard Sales units 50,000 400,000 RM RM Sales price per unit Prime costs per unit Direct materials cost per unit Direct labor costs per unit Manufacturing support costs per unit 650 180 95 475 130 75 76 55 80 120 Last year, Lampung Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO 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. She obtained the following ABC information for 2015: Activity Cost Driver Setups of setups Machine-related of machine hours Packing of shipments Cost (RM) Total 500,000 500 44,000,000 600,000 5,000,000 250,000 Deluxe 400 300,000 50,000 Standard 100 300,000 200,000