QUESTION 3 (30 MARKS: 54 MINUTES) Frenzy Sdn Bhd (FSB) makes three (3) main products FZ12, FZ34 and FZ56, using broadly the same production processs and equipment. Currently FSB is using a traditional product costing system. Details of the products and relevant information for a period are given below FZ34 2000 FZ56 500 FZ12 3000 Output in units Direct material cost per unit Direct labor hours per unit Direct labor cost per hour Machine hours (per unit) RM55 1.5 RM25 1.5 RM35 RM90 1 RM15 2 RM18 1 Currently, manufacturing overhead totalled RM138,750 is allocated on the basis of machine hours Having attended a workshop on activity-based costing (ABC) system, the Finance Director of FSB is now considering to implement ABC system to determine the product costs. In consultation with the owner, FSB identified four (4) major activities and then completed the first-stage allocations of costs to the activity cost pools. The manufacturing overhead costs allocated to four activity cost pools are: Activity Cost Pool Allocated Cost (RM) 57,000 34,875 18,750 28,125 Machining Set-up costs Quality control Materials handling The Finance Director has ascertained the cost driver to be used for the other overhead costs (For Machining activity, machine hour is still used as the cost driver) as follows: Cost pool Set-up costs Quality control Materials handling Cost driver Number of production runs Number of production runs Number of requisitions raised FZ12 FZ34 FZ56 2 8 10 2 8 10 15 10 20 Required: a) Calculate unit product cost for each product using the traditional costing system. (9 marks) Calculate unit product cost for each product using the ABC system. b) (16 marks) c) Explain why the unit product costs differ under the two costing systems