BAC1054 PRINCIPLES OF ACCOUNTING As Dina examines the data, she decides that the cost of assembly line can be directly assigned to each of these product lines and do not need to be assigned with the other costs. The purchasing and refining materials include direct materials costs of RM100,000 where 60% is for Customade trolleys and 40% is for Heavy duty trolleys. Materials purchased on a just in time basis and all products are finished on the same day started thus there is no inventory for raw materials or work in process. Current Designs uses RM234,000 in direct labor costs to produce 1,000 Customade trolleys and RM286,000 in direct labor costs to produce 4,000 Heavy duty trolleys each year. Dina is considering one of the following three methods. a. One method of assigning overhead would assign the common costs to each product line by using an assignment basis such as the number of employees working on each type of trolley or the amount of factory space used for the production of each type of trolley. Diane knows that about 50% of the area of the plant and 50% of the employees work on the Customade trolleys, and the remaining space and other employees work on the Heavy duty trolleys. b. Another method of assigning overhead is to use direct labor dollars as an assignment basis. c. Activity-based costing requires a cost driver for each cost pool. Use the following information Driver Activity cost pools Designing new models Creating and testing prototypes Cost drivers Number of models Number of prototypes Number of materials || Driver Amount for Customade trolleys Amount for Heavy duty trolleys 3 1 6 2 12 1 12 12 15000 2000 Purchasing and refining materials order Supervision Number of employees Inspection and storage Number of hours CASE REQUIREMENTS: You are required to write a report for Dina that include the following: 1. Compare the differences between three overhead assignment methods and recommend the best method to adopt. 2. Compute the unit cost for Customade trolley and Heavy duty trolley. (6 marks) (4 marks) 3. Recommend the appropriate price for each product assuming a target net income of RM200,000 and all units made are sold. 4. Prepare the budgeted income statement assuming that the target sales are met. (6 marks) (4 marks) (TOTAL: 20 MARKS) 2