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QUESTION 2 (25 marks) Macho Bhd manufactures two models of ultra-high fidelity speakers, the X007 model and the X099 model. Below are the data regarding
QUESTION 2 (25 marks) Macho Bhd manufactures two models of ultra-high fidelity speakers, the X007 model and the X099 model. Below are the data regarding the models: Product X007 X099 Direct Labour Hours 1.8 DLHs per unit 0.9 DLHs per unit Annual Production 5,000 units Total Direct-Labor hours 9,000 DLHs 27.000 DLHS 36.000 DLHS Additional information: Model X007 requires RM72 in direct materials per unit, and model X099 requires RM50. The direct labour rate is RM10 per hour. The company uses direct labour hour as the base to apply manufacturing overhead cost to products. Model X007 is more complex to manufacture than model X099 and requires the use of special equipment. Because of the required above, the company is considering the use of activity-based costing to apply manufacturing cost to products. Three activity cost pools have been identified as follows: Activity cost pool Activity Measure Estimated Total Cost Estimated Total Activity Machine set-up Special processing General factory Number of setups Machine-hours Direct labor-hours RM360,000 RM180,000 RM 1.260.000 RM 1.800.000 X007 50 12.000 9,000 X099 100 0 27,000 Total 150 12.000 36,000 Required: a) Compute the predetermined overhead rate, (3 marks) b) Compute the unit product cost for each model using direct labor-hour as allocation base. (8 marks) c) Compute the unit product cost for each model using activity based costing system. (11 marks) d) Explain why overhead cost shifted from high-volume to low-volume model under activity-based costing model
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