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Healthy World Sdn Bhd is involved in manufacturing two mineral water dispenser products. The company's production plant is located in Kuantan, Pahang. It has been

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Healthy World Sdn Bhd is involved in manufacturing two mineral water dispenser products. The company's production plant is located in Kuantan, Pahang. It has been adopting a traditional method in allocating overhead costs to each product by using a machine hour basis. Recently, the company is facing intense competition from its competitors. In order to overcome the problem, the management is planning to adopt Activity based-costing. The following information is gathered to enable the implementation of the new costing method: Healthy AA 70,000 units Healthy AA Plus 30,000 units Annual production 350 380 Direct material cost per unit (RM) Direct labour cost per unit (RM) Machine hours per unit 70 60 3 hours 2 hours 5 hours 6 hours 600 400 Direct labour hour per unit Number of production runs Number of deliveries Number of quality inspections 500 300 80 60 Activity Cost Driver Amount of overheads (RM) Machine set-up Number of production runs Machine hours Machining Packaging Number of deliveries RM 2,640,000 Quality control Number of quality inspections Following is the distribution of overheads: Activity Distribution of overheads Machine set-up 5% Machining 85% Packaging 7% Quality control 3% During the year, Healthy Sdn Bhd completed one order from a new customer, Better Life Enterprise. The detail data for the order is as follows: Healthy AA 8,000 Units ordered Healthy AA Plus 5,000 1,900,000 60 Direct materials cost (RM) 2,800,000 70 Direct labour cost / unit (RM) Required: a) Assume that Healthy Sdn Bhd is adopting traditional costing system where the basis used to allocate overhead cost is machine hours. Compute total production cost from the order. (Round off to two decimal places) (8 marks) b) Using Activity Based-Costing system, calculate overhead cost per unit of Healthy AA. (Round of to two decimal places) (7 marks)

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