Sari Ratu Berhad manufactures two products, Product X and Product Y. Currently, the company uses traditional costing system (blanket approach) to calculate the overhead. The company uses machine hours as the overhead base. Total machine hours used were 25,000 hours.

The company expects to produce and sell 600 units of Product X and 550 units of Product Y during the current year. Alternatively, the company has an option to implement activity-based costing to compute unit product costs for external reports. Data relating to the company'sactivities cost pools are given below for the current year:

Activity cost poolOverhead costBudgeted level for cost driver

RM

Machine setups 5,250210 setups hours

Purchase orders 74,1001,900 orders

Assembly 89,88012,840 direct labour hours

Maintenance 60,000140 maintenance hours

Moving goods 8,800 200 moves

Total238,030

Additional information:

Product XProduct Y

Setup hours60150

Orders6201,280

Direct labour hours84012,000

Maintenance hours8070

No of moves12080

Machine hours 20 hours25 hours

Required:

A.Using the traditional costing system (blanket approach), determine the predetermined overhead rate.

(3 marks)

B.Based on your answer in (A) above, Compute the overhead cost per unit for each product.

(4marks)

C.Using the activity based costing system, calculate the cost driver rate for each overhead activity.

(8 marks)

D. Compute the overhead cost per unit for each product using approach used in (c).

(6 marks)

E. Differentiate between traditional costing and ABC system.