The following are annual budgeted amounts for a manufacturer for the coming year (a normal year): ·      Total budgeted annual overheads and direct labour time are RM8,000,000 and 8,000 hours respectively ·      The activity pools which give rise to this annual overhead cost consist of: -       Procurement activity pool RM1,500,000 (budgeted 150 purchase orders per year) -       Production setup pool RM500,000 (budgeted 500 setups per year) -       Automation and Robotic pool 4,000,000 (budgeted 40,000 hours per year) -       Marketing and Distribution activity pool RM2,000,000 (budgeted 20,000 salesman hours per year) The company produces 10,000 units of Product A annually with the following unit costs: direct materials RM10, direct labour 2 hours

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The following are annual budgeted amounts for a manufacturer for the coming year (a normal year):

·      Total budgeted annual overheads and direct labour time are RM8,000,000 and 8,000 hours respectively

·      The activity pools which give rise to this annual overhead cost consist of:

-       Procurement activity pool RM1,500,000 (budgeted 150 purchase orders per year)

-       Production setup pool RM500,000 (budgeted 500 setups per year)

-       Automation and Robotic pool 4,000,000 (budgeted 40,000 hours per year)

-       Marketing and Distribution activity pool RM2,000,000 (budgeted 20,000 salesman hours per year)

The company produces 10,000 units of Product A annually with the following unit costs: direct materials RM10, direct labour 2 hours. The rate for direct labour is RM 10 per hour.

Required:

a) Identify an appropriate activity level for each of the overhead cost pool. Why are there no facility level costs?

b) Calculate the unit cost of Product A using volume based costing with MH as the cost driver.

c) To produce and sell 10,000 units of Product A requires 10 purchase orders, 20 setups, 20,000 MH, 200 salesman hours. Calculate the unit cost of Product A using Activity-Based Costing (ABC).