Royale Berhad is involved in the manufacturing of soft toy products since 2015. The company is...

Transcribed Image Text:

Royale Berhad is involved in the manufacturing of soft toy products since 2015. The company is currently adopting traditional method in allocating its overhead costs to each product. The overhead costs are absorbed to each product using machine hour basis. Recently, the company is facing an intense competition from competitors who are selling similar products through the internet. Royale Berhad must reduce the selling price to be more competitive in the market. The management is planning to adopt an activity-based costing method to overcome the problem. The following information is gathered to enable the implementation of the new costing method: a. Products Annual production and sales unit Direct material cost per unit Direct labour cost per unit Direct labour hours per unit Machine hours per unit No. of production runs No. of quality inspections No. of receipts No. of deliveries b. Activity cost pool Machine set-up CONFIDENTIAL Machining Receiving Packaging Quality control Total Overhead Costs Boboi Boy 82,000 RM28.00 RM15.00 1.5 hours 2.5 hours 70 40 180 140 Cost (RM) 3 160,000 1,025,000 400,000 600,000 480,000 2,665,000 Yaya Yah 55,000 RM24.00 RM20.00 2 hours 2.5 hours 60 30 160 130 Adu Du 45,000 RM30.00 RM20.00 2 hours 1.5 hour 70 50 160 130 Cost Driver No. of production runs Machine hours No. of receipts No. of deliveries No. of quality inspections MAF451/TEST 1 Compute the product cost of each product using the activity-based costing method. (14 marks) Explain briefly three (3) benefits of using activity-based costing method. (6 marks) (Total: 20 marks) Royale Berhad is involved in the manufacturing of soft toy products since 2015. The company is currently adopting traditional method in allocating its overhead costs to each product. The overhead costs are absorbed to each product using machine hour basis. Recently, the company is facing an intense competition from competitors who are selling similar products through the internet. Royale Berhad must reduce the selling price to be more competitive in the market. The management is planning to adopt an activity-based costing method to overcome the problem. The following information is gathered to enable the implementation of the new costing method: a. Products Annual production and sales unit Direct material cost per unit Direct labour cost per unit Direct labour hours per unit Machine hours per unit No. of production runs No. of quality inspections No. of receipts No. of deliveries b. Activity cost pool Machine set-up CONFIDENTIAL Machining Receiving Packaging Quality control Total Overhead Costs Boboi Boy 82,000 RM28.00 RM15.00 1.5 hours 2.5 hours 70 40 180 140 Cost (RM) 3 160,000 1,025,000 400,000 600,000 480,000 2,665,000 Yaya Yah 55,000 RM24.00 RM20.00 2 hours 2.5 hours 60 30 160 130 Adu Du 45,000 RM30.00 RM20.00 2 hours 1.5 hour 70 50 160 130 Cost Driver No. of production runs Machine hours No. of receipts No. of deliveries No. of quality inspections MAF451/TEST 1 Compute the product cost of each product using the activity-based costing method. (14 marks) Explain briefly three (3) benefits of using activity-based costing method. (6 marks) (Total: 20 marks)

Answer rating: 100% (QA)

In RM Boboi Boy Yaya Yah Adu DU Direct materials per unit 2800 2400 3000 Direct labor cost per unit ... View the full answer