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QUESTION 2 [25 marks Daniel has recently been appointed as the managerial accountant for Akmal Pharmaceutical Bhd. Upon checking the costing system used by the company, Daniel noticed that the company uses traditional costing system. Daniel believes that activity-based costing (ABC) and cost-volume- profit analysis (CVP) are better costing methods and decides to present the ABC and CVP methods to the management. The information of the three products produced by the company is as follows: Products DA SI LA 150,000 90,000 325.00 120,000 450.00 200.00 275.00 80.00 100.00 Sales and production (units) Selling price / unit (RM) Direct materials (RM) Direct labour (RM) ) Assembly department (machine hour per unit) Quality control department (labour hour per unit) 40.00 100.00 80.00 7 4 6 1 1.5 2 Fixed overhead allocated to the production departments is RM2,000,000 each year. Daniel opines that the overhead could be further analysed into the following activities and cost drivers: Department Activity Estimated overhead (RM) Cost drivers Expected use of cost drivers 600,000 4,000 Pre-treatment Product fabrica- tion Assembly 1,000,000 200,000 Post-treatment 230,000 Number of treat- ments Machine hours Number of ser- vices Number of in- spections Number of boxes 15,000 90,000 10,000 Quality assess- ment Final Packaging Quality Control 80,000 3,000 2,000,000 Page 4 of 5 AFMB114 Special Semester, 2020/2021 Activities Expected Activities DA SI 1,400 1,600 40,000 100,000 LA 1,000 Pre Treatment Fabrication Process 60,000 3,000 7,000 5,000 Post Treatment Packaging & Optical test Final Packaging 3,000 4,000 1,500 3,000 1,000 500 Required: (a) If the company plans to adopt a single plant-wide overhead absorption rate, determine the best allocation base AND calculate the overhead absorption rate. [2 marks] (b) Compute the product cost per unit for each product using the overhead absorption rate in (a). [3 marks] (c) Compute the product cost per unit for each product if the company adopts the ABC method. [13 marks) (d) Using your answers in (c), compute the minimum unit that needs to be produced to achieve a profit for each product based on the CVP analysis. [4 marks] (e) Based on your answers in (c), determine which product the company should produce AND justify your answer. [3 marks] -END OF QUESTION PAPER