Question 4

Restu Mulia Manufacturing has identified the following overhead costs and cost drivers for the coming year:

Activity Cost driver Total Cost Budgeted Activity Level

Quality Number of inspections RM 250,000 1,250

Maintenance Maintenance hours RM 200,000 2,500

Machine Setup Setup hours RM 180,000 400

Material handling Number of material moves RM170,000 1,000

Job 1 Job 2 Job 3

Direct materials. RM15,000 RM12,800 RM18,000

Direct labor RM24,000. RM 24,000 RM 28,000

Unit completed 400. 200 500

Number of inspections. 20 10 20

Number of material moves 60 20 80

Maintenance hours 20 50 10

Number of setup 13 25 18

Budgeted direct labor cost was RM400,000 and budgeted direct material cost was RM600,000. The following information was collected on three jobs that were completed during the month:

Required:

a. If the company uses traditional costing and allocates overhead using direct labor cost, how much overhead cost should be assigned to Job 1, 2 and 3?

[10 marks]

b. If the company uses activity-based costing (ABC), how much overhead cost should be assigned to Job 1, 2, and 3?

[10 marks]

c. As a Management Accountant, analyze which method is better to your company. Justify your answer.

[5 marks]

[Total: 25 Marks]