ABC Sdn. Bhd. manufactures multiple types of products. ABC has been approached by YXZ Sdn. Bhd. and asked to make two products; 2,000 units of Product # 838 and 4,000 units of Product # 103. Currently, ABC also produces 16,000 units of other products.

The management accountant of ABC has compiled the products data as below:

	Product	Product	Other	Total
Production/sales (units)	# 838 2,000	# 103 4,000	products 16,000	22,000
Selling price/unit	RM750	RM150
Total direct material costs	RM000 450	RM000 150	RM000 1,200	RM000 1,800
Total direct labour costs	300	100	1,200	1,600

Total variable production overheads will amount to RM2,400,000 of which 30% relates to direct materials (being the procurement, warehousing, inspection and use of direct material) and 70% are direct labour related.

ABC currently absorbs variable production overheads into product units using company- wide percentages on total direct material costs (40%) and total direct labour costs (105%).

ABC will not undertake any work which does not yield an estimated contribution to sales ratio of 30%.

Because profitability has been lagging and competition has been getting more intense, ABC is considering to implement Activity-based costing system. The management accountant has identified the following:

Activities	Cost Drivers based on Total Volume Factor			Total Cost Drivers
	Product #838	Product #103	Other Products
Material related variable overhead	8,000	28,000	64,000	100,000
Labour related variable overhead	12,000	20,000	64,000	96,000

All computation are to be rounded to two decimal places.

Required:

1. Identify TWO (2) general advantages associated with activity-based costing.(2 marks)
2. Calculate variable cost per unit and contribution to sales ratio of Product #838 and Product #103 using traditional costing method.(3 marks)
3. Calculate variable cost per unit and contribution to sales ratio of Product #838 and Product #103 using activity-based costing method. (4 marks)
4. Explain how the comparison of the results of the two costing methods could impact the decisions made by ABCs management.(5 marks)
5. Identify potential non-value added activities in ABC and what suggestions would you have for ABC to improve the competitiveness of the companys products in the marketplace? (5 marks)