Best Manufacturing Sdn Bhd produces 4,000 units of product A and 1,000 units of product B, and that each unit (whether A or B) requires one hour of direct labour at RM10.00 per hour. Total labour cost is therefore RM10.00 (4,000+1,000), or RM50,000. Therefore, if supervisory effort costing RM5,000 is required to coordinate this production, it might be reasonably assumed that each hour of direct labour requires a proportional amount of supervision, resulting in an overhead or burden charge of RM1.00 per direct labour hour, and a total cost for labour and supervision of RM11.00 per unit (whether A or B). Now, assume that costs of setting up the production line for products A and B total is RM8,000. If we allocate this overhead cost in proportion to direct labour, it will amount to RM8,000/5,000, or RM1.60, and we will now have a unit cost of RM12.60 for both products A and B. However, this setup cost may represent one RM4,000 setup activity for each of the product's A and B, so that a fairer representation of setup cost would be RM4,000/4,000, or RM1.00 per unit of A, and RM4,000/1,000, or RM4.00 per unit of B. As a result, we find that the unit costs for direct labour, supervision, and setup total RM12.00| for product A and RM15.00 for product B. Knowing this, we may try to get a higher price for product B or we may want to quit making it. From the case study of Best Manufacturing Sdn Bhd above, [Dari kajian kes Best Manufacturing Sdn Bhd di atas,] (a) discuss how allocation of overhead costs on the basis of direct labour might distort product pricing where some products are produced by automated machining centres and others by more labour-intensive methods. [bincangkan bagaimana peruntukan kos overhed berasaskan buruh langsung berkemungkinan menjejaskan harga barangan di mana terdapat barangan yang dikeluarkan oleh pusat mesin otomatik dan lainnya melalui cara insentif buruh.] (10 Marks/ Markah) (b) what would you suggest to the company regarding product B ? [apa anda akan cadangkan kepada syarikat berkaitan barangan B?] Best Manufacturing Sdn Bhd produces 4,000 units of product A and 1,000 units of product B, and that each unit (whether A or B) requires one hour of direct labour at RM10.00 per hour. Total labour cost is therefore RM10.00 (4,000+1,000), or RM50,000. Therefore, if supervisory effort costing RM5,000 is required to coordinate this production, it might be reasonably assumed that each hour of direct labour requires a proportional amount of supervision, resulting in an overhead or burden charge of RM1.00 per direct labour hour, and a total cost for labour and supervision of RM11.00 per unit (whether A or B). Now, assume that costs of setting up the production line for products A and B total is RM8,000. If we allocate this overhead cost in proportion to direct labour, it will amount to RM8,000/5,000, or RM1.60, and we will now have a unit cost of RM12.60 for both products A and B. However, this setup cost may represent one RM4,000 setup activity for each of the product's A and B, so that a fairer representation of setup cost would be RM4,000/4,000, or RM1.00 per unit of A, and RM4,000/1,000, or RM4.00 per unit of B. As a result, we find that the unit costs for direct labour, supervision, and setup total RM12.00| for product A and RM15.00 for product B. Knowing this, we may try to get a higher price for product B or we may want to quit making it. From the case study of Best Manufacturing Sdn Bhd above, [Dari kajian kes Best Manufacturing Sdn Bhd di atas,] (a) discuss how allocation of overhead costs on the basis of direct labour might distort product pricing where some products are produced by automated machining centres and others by more labour-intensive methods. [bincangkan bagaimana peruntukan kos overhed berasaskan buruh langsung berkemungkinan menjejaskan harga barangan di mana terdapat barangan yang dikeluarkan oleh pusat mesin otomatik dan lainnya melalui cara insentif buruh.] (10 Marks/ Markah) (b) what would you suggest to the company regarding product B ? [apa anda akan cadangkan kepada syarikat berkaitan barangan B?]
