Management accounting question

Required:

i. By showing relevant workings, compute the total product cost using traditional and ABC systems for Hups model. (14 marks)

ii. Based on the answer in part a) i., explain the different results derived from both costing methods. (4 marks)

a) Kepompong Corporation is a fan manufacturer. Kepompong produces two types of fan model: Hups and Spree. Estimated cost data regarding two models are as follows: Direct material per unit Direct labour cost per hour Direct labour hour per unit Annual production(units) Hups RM31 RM12 1.5 9,800 Spree RM17 RM12 1.25 22,000 The overhead cost is currently absorbed by direct labour hour. Management has designed an Activity Based Costing (ABC) system with the following activity cost pools, activity measure, overhead cost and its level of activity. Activity Measure Activity Cost Pools Machine Set-ups Machine Processing Production Order General Factory Number of set-up Machine hour Number of order Direct labour hour Overhead Cost (RM) 171,600 30,750 73,000 105,500 Level of Activity Hups Spree 80 180 1,150 2,600 70 130 14,700 27,500