Question 2 (25 marks) Vieoatg Sdn Bhd manufactures a product that is available in two models, Future and Traditional. Traditional has been around for quite sometime and Future has just been introduced recently. Since the introduction of Future model, the company's profits have steadily declined and the management has become concerned about the accuracy of its costing system. Meanwhile, sales of the Future model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, the management estimated that RM300,000 overhead costs would be incurred and the company would produce and sell 500 units of the Future model, and 5,000 units of the Traditional model. Future model requires 2.0 hours of direct labor time per unit, and Traditional model requires 1.0 hour. While, direct materials and labor costs per unit are as follows: Future (RM) Traditional (RM) Direct material costs per unit 110.00 80.00 Direct labor cost per unit 30.00 15.00 Required: a) Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Compute the unit product cost for one unit of each model. (6 marks) b) The management is aware that something is not right with the existing costing system and has instructed a special team to come with another costing system as follows: Expected Activity Activity Cost Pool and Activity Measure Estimated Future Traditional Total Overhead Cost (RM) Purchase orders (number of orders) 20,000 100 300 400 a) Compute the predetermined overhead late umy (6 marks) b) The management is aware that something is not right with the existing costing system and has instructed a special team to come with another costing system as follows: Expected Activity Estimated Future Traditional Total Activity Cost Pool and Activity Measure Overhead Cost (RM) Purchase orders (number of orders) 20,000 100 300 400 10,000 60 140) 200 Rework requests (number of requests) Product testing (number of tests) Machine-related (machine-hours) 210,000 900 1,200 2,100 360,000 1,500 2,500 4,000 600,000 Compute the activity rate for each of the activity cost pools. (4 marks) c) Determine the total amount of overhead that would be assigned to each model for the year. (6 marks) d) Compute the unit product cost for one unit of each model. (4 marks) e) Explain why do you think the company's profits are declining