QUESTION 3 Ikhwan Sdn Bhd (ISB) makes two types of trophies, Deluxe and Basic. Ikhwan's traditional costing system has two direct cost categories (materials and labor) and one indirect cost pool. The traditional costing system allocates indirect costs on the basis of machine hours. Recently, the owners of the company have been concerned about a decline in the market share for deluxe trophies. Information related to ISB production for the most recent year is as follows: Deluxe Basic Units sold 3,200 1,800 Selling price (RM) 125 200 Direct materials cost (RM) 96,000 81,000 Direct labor cost (RM) 76,800 64,800 Production runs 40 85 Materials moves Machine setups 72 168 45 55 Machine hours Number of inspections 5,500 4,500 250 150 The owners have heard of other companies in the industry that are now using an activity-based costing (ABC) system and are curious of how an ABC system would affect their product costing decisions. After analyzing the indirect cost pool for ISB, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. ISB collected the following data related to the indirect cost activities: Activity Production scheduling Material handling Machine setup Assembly Inspection Activity Cost (RM) Activity Cost Driver 95,000 Production runs 45,000 Materials moves 25,000 Machine setups 60,000 Machine hours 8,000 Number of inspections a. b. Marketing costs were determined to be 3% of the sales revenue for each type of trophies. REQUIRED: Calculate the unit cost of deluxe and basic trophies if ISB allocates overhead costsusing ABC system. Explain why plant-wide and ABC system show different costs for the deluxe and basic trophies