PLEASE SHOW WORK ELABORATELY

Question 2

Black Pink Company makes three main products using the same production methods and equipment for each product. A traditional costing method is used at present, although an activity-based costing (ABC) method is being considered. Details of the three products for a typical period are given below:

Product	Labour hour/unit	Machine hour/unit	Material Cost/unit	Units of productions
Star	0.5 hour	1.5 hours	RM 20	750
Moon	1.5 hours	1.0 hour	RM 18	1,250
Sun	1.0 hour	3.0 hours	RM 28	7,000

Direct labour costs RM6 per hour and production overheads are absorbed on a machine hour basis. The rate for the period is RM28 per machine hour. Further analysis shows that the total of production overheads can be divided as follows:

Costs relating to set-ups	35%
Costs relating to machinery	20%
Costs relating to materials handling	15%
Costs relating to inspection	30%
Total production overhead	100%

The following activity volumes are associated with the product line for the period as a whole. Total activities for the period:

Product	Number of set-ups	Number of material handling	Number of inspections
Star	75	12	150
Moon	115	21	180
Sun	480	87	670
Total	670	120	1,000

Required:

1. Calculate the cost per unit for each product using traditional costing method.

(6 marks)

b. Calculate the cost per unit for each product using activity-based costing method. (Round-off the figures)

(14 marks)

[20 marks]