1. Sazzy Books produces a range of notebooks and diaries that are sold exclusively online via the company's website. Customers have the opportunity to personalize their purchase by selecting designs for the front and back covers of the notebooks or diaries. The company currently uses a traditional overhead absorption costing system based on machine hours to allocate manufacturing overheads to products. This year, the company recorded a loss in its financial statements for the first time since it commenced trading six years ago. However, the management accountant has suggested that the problem relates to overhead allocation. He has argued for the adoption of activity-based costing, Activity based cost information obtained for the company shows that customers place individual orders and then discuss the design of the notebooks or diaries using emails. The artwork costs depend on the number of setups required to compile the notebook or diary. In addition, the company has a policy of despatching each order individually. Financial information relating to the most recent tradi and two orders recently received are provided below. Overhead costs Activity drivers Ordering costs RM7200 48 000 Total orders received Design expenses RM28 500 356 250 Total design consultation emails Artwork RM17250 115 000 Total artwork setups Despatch costs RM10 800 90 000 Total packets despatched 21 250 Total machine hours Notebook K134 Diary XT501 RM1.86 RM1.24 Details of two orders received Direct materials - paper, binding, etc Direct labour Machine hours required Number of design consultations Number of artwork setups required RM0,53 RM0.20 3 RM0, 68 RM0, 30 5 8 Required: (a) Calculate the cost of each of the orders received using: (1) The existing overhead allocation method. (5 marks) (ii) Activity based costing (ABC). (15 marks) (b) Comment briefly on your answers at (a) (i) and (ii) above