Kayu Manis Sdn Bhd (KMSB) manufactures two products, Product X1 and Product Y2. Currently, the company uses traditional costing system (blanket approach) to calculate the overhead. The company uses machine hours as the overhead base. Total machine hours used were 700 hours. The company expects to produce and sell 100 units of Product X1 and 150 units of Product Y2 during the current year. Alternatively, the company has an option to implement activity based costing to compute unit product costs for external reports. Data relating to the companys activities cost pools are given below for the current year:

Activity cost pool Overheads Cost (RM) Machine setups 5,500 Purchase orders 74,100 Assembly 89,000 Maintenance 60,000 Moving goods 8,800 TOTAL COSTS 237,400

Budgeted level for cost driver: 200 setups hours 1,900 orders 10,000 direct labor hours 140 maintenance hours 200 moves

Additional information: Product X1 Product Y2 Setup hours 60 140 Orders 620 1,280 Direct labor hours 6,000 4,000 Maintenance hours 80 60 No of moves 12 80 Machine hours 400 hours 300 hours

REQUIRED:

(a) Using the traditional costing system (blanket rate), determine the predetermined overhead rate.

(b) Based on your answer in (a) above, compute the total overhead cost for each product and the overhead cost per unit.

(c) Using the activity-based costing system, calculate the cost driver rate for each overhead activity.

(d) Compute the overhead cost per unit for each product using approach used in (c).

(e) Differentiate between traditional costing and ABC system.