C n: The D*Muara Holiday Agency Ltd is a holiday property rental agency. which has been in business for eight years. It acts on behalf of holiday property owners to nd rental customers for their houses and manage the bookings process. The business operates from an office in Terengganu. Malaysia. and a smaller ofce in Kuantan. Pahang. D'lviuara Holidays deals with three types of holiday property Anggun Holiday Cottages. Cempaka Holiday Cottages. and Dahlia Houses for Holidays. which are properties for larger groups of people. D'lvluara Holidays charges 20% of the price of each rental for its services. It takes payments from customers in instalments and pays over the owners their 80% share using monthly payments. D'lvluara Holidays has no direct costs: all of its costs are overheads. The overheads relate to marketing to customers and to owners to make sure they have enough good quality properties to advertise. taking bookings. processing payments from customers and to owners. dealing with queries from owners. dealing with customer queries and complaints. and inspecting each property in Terengganu and Pahang once per year to do a health and safety check and make sure each property is kept to high standards. The inspectors for the UMuara properties are based in the Pahang ofce; all other functions of the business take place in Terengganu. Under the current costing system. an overhead absorption rate (OAR) is calculated on the basis of the number of bookings made. D'lvluara Holidays' accountant has calculated that under the current system. the Anggun Cottages part of the business is running at a loss. and effectively being subsidized by the other two parts of the business. He has suggested to the directors that this part of the business be reduced. and that the Cempaka and Dahlia Houses parts of the business should be expanded. The directors are not sure that they believe the management accountant. and do not want to take his advice without further investigation. They know that by far the biggest number of bookings in any year are for Anggun Cottages. and overall the business is protable last year it made a sales margin of just under 12%. wl'iich the directors thought was quite good. given that it is in a very competitive market. They do not think they can increase the agency rate above 20%, given the state of the market. One of the directors, Wan Yi, has read in a finance magazine that ABC is often considered a better way to allocate overheads to products and services than traditional overhead absorption methods, particularly when overheads are high compared with direct costs. She has asked you, as a consultant specializing in management accounting, to examine the financial data below, prepare alternative costings based on ABC, and advise the business on the profitability of the different rental types.Financial information Overheads for the last year were RM6,768,000. The ABC breakdown of these overheads together with most likely cost drivers is: Activity Pool Annual Driver total RM Marketing to customers 216,960 Number of customer advertisements Marketing to new owners 140,560 Number of owner advertisements Taking bookings 2,210,400 Number of bookings Processing payments 2,371,200 Number of payments Dealing with owner queries 436,200 Number of owner queries Dealing with customer queries and 589,680 Number of customer queries complaints Inspecting Anggun properties 398,000 Number of inspections in Pahang Inspecting Cempaka properties 405,000 Number of inspections in Terengganu RM6,768,000 The frequency of each driver in the year was ascertained to be approximately: 480 customer advertisements 280 owner advertisements . . . 36,000 bookings 76,000 payments 11,600 owner queries .. . 10,800 customer queries and complaints 200 inspections in Pahang 1,100 inspections in Terengganu One booking for each of the three types of holiday let requires the following: . Anggun Holiday Cottages - On average it takes 0.02 customer advertisements to generate a booking, and 0.01 owner advertisements to find appropriate properties. Customers make 2 payments per booking. The average number of owner queries per booking is 0.5, and each booking results in one customer query/complaint. There are 0.05 inspections (from the Pahang office) made per booking. Cempaka Holiday Cottages - It is easier to find customers and owners for cottages in Terengganu, so on average it takes 0.01 customer advertisements to generate a booking, and 0.005 owner advertisements to find appropriate properties. As with Cempaka cottages, customers make 2 payments per booking. The more straightforward nature of dealing withcottages and customers in Terengganu means that on average the number of owner queries per booking is 0.2, and each booking results in 0.1 customer query/complaint. There are 0.04 inspections (from the Terengganu office) made per booking. . Dahlia Houses for Holidays. It is harder to find customers and owners for Large Houses in Terengganu, so on average it takes 0.03 customer advertisements to generate a booking, and 0.025 owner advertisements to find appropriate properties. Because of the larger sums of money involved, customers make 3 payments per booking. The more complicated requirements of customers and owners of Dahlia Houses means that on average there is one owner query and one customer query/complaint per booking. It takes longer to inspect these houses, so there are 0.02 inspections (from the Terengganu office) made per booking. The average rental price charged to customers per booking is as follows (please note you can ignore SST in your analysis): Anggun Cempaka Dahlia Houses Cottages Cottages Selling price RM1,000 RM800 RM2,200