Sin Max Sdn Bhd Manufactures Two Products Premium And Deluxe The Standard Direct Wage Rate To Produce Both Products Is 1 (64.64 KiB) Viewed 10 times
Sin Max Sdn Bhd Manufactures Two Products Premium And Deluxe The Standard Direct Wage Rate To Produce Both Products Is 2 (64.64 KiB) Viewed 10 times
Sin Max Sdn Bhd manufactures two products, PREMIUM and DELUXE. The standard direct wage rate to produce both products is RM10 per direct labour hour and overhead absorption rate (OAR) is RM25 per direct labour hour. The details of the products' information are as follows: a. Estimated production volume Direct material cost per unit Direct labour cost per unit Machine hours The management accountant, who has studied the use of Activity Based Costing (ABC) system has estimated that the company's overhead is RM637,500. An analysis of estimated overhead cost reveals the following activities and their related cost drivers. b. ACTIVITY COST POOL General supplies Order processing Machine processing Product inspection ii. PREMIUM 2,500 units RM25 RM30 17,500 hours AMOUNT (RM) 500 orders have been processed and the order ratio is 3:2 between PREMIUM and DELUXE, while 10,000 hours of inspection were spent for both products at the proportion of 20% for PREMIUM and the remaining for DELUXE. Required: DELUXE 4,500 units RM40 RM40 22,500 hours COST DRIVER Number of units produced Number of orders processed Machine hours worked 42,000 95,500 400,000 100,000 Inspection hours By using the ABC system, calculate the following: i. Activity Based Overhead Rate (ABOR) Product cost per unit for product DELUXE Based on your answer in (a) above, advise the company whether the traditional costing system has overstated or understated the product cost per unit of product DELUXE. Support your answer with calculation.
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