Question 16 (c) Lampung Sdn Bhd produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2015, Lampung compiled the following data for the two products: Sales units Deluxe 50.000 Standard 400.000 RM RM Sales price per unit Prime costs per unit Direct materials cost per unit R Direct labor costs per unit Manufacturing support costs per unit M 650 180 95 75 80 475 130 75 55 120 NS Last year, Lampung Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an Activity Based Costing (ABC) analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2015: Activity Cost Driver Cost (RM Total Setups of setups 500,000 500 Machine-related of machine hours 44.000.000 500.000 Packing of shipments 5,000,000 250,000 Deluxe 400 300.000 50,000 Standard 100 300.000 200.000 (c) "ABC systems may result in misallocation of indirect costs. Justify with reasons whether you agree with the above statement. Question 16 (c) Lampung Sdn Bhd produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2015, Lampung compiled the following data for the two products: Sales units Deluxe 50.000 Standard 400.000 RM RM Sales price per unit Prime costs per unit Direct materials cost per unit R Direct labor costs per unit Manufacturing support costs per unit M 650 180 95 75 80 475 130 75 55 120 NS Last year, Lampung Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an Activity Based Costing (ABC) analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2015: Activity Cost Driver Cost (RM Total Setups of setups 500,000 500 Machine-related of machine hours 44.000.000 500.000 Packing of shipments 5,000,000 250,000 Deluxe 400 300.000 50,000 Standard 100 300.000 200.000 (c) "ABC systems may result in misallocation of indirect costs. Justify with reasons whether you agree with the above statement