QUESTION 3 (35 marks)

ACB Company has three types of product departments (Milk, Yogurt and Cheese) with the following information:

		Milk	Yogurt	Cheese	Total
Number of advertisements	40		40	70	150
Number of Customer Orders		1400	800	1300	3,500
Number of km driven		90,000	60,000	30,000	180,000

The business also has overhead costs as follows:

Activity	Costs per activity AED	Cost driver
Maintenance vehicle	AED 38,000,000	Number of km driven
Admin cost customer orders	AED 420,200	Number of customers orders
Advertising	AED 610,000	Number of advertisements

1. Determine the cost of each of the company's segments under the traditional costing system in which it applies total manufacturing overhead of AED 37,213,200.00 using a predetermined overhead rate based on number of customer orders.

2. If the company considering using a variation of activity-based costing to determine its segments costs for external reports. Determine the cost of each of the company's three segments under activity-based costing system.