The Pears Technology Sdn. Bhd. produces two products: tablet and smart phone. The company uses a normal cost system and overhead costs are currently allocated based on direct labour hours. However, the hired cost consultants have recommended that the company use activity-based costing to charge overhead to products.

The company expects to produce 4,000 tablets and 2,000 smart phones in 2021. Each tablet requires two direct labor hours to produce and each smart phone requires 30 minutes to produce. The direct material and direct labour costs included in the two products are as follows:

Cost	Tablet RM	Smart Phone RM
Direct material (per unit)	30.00	17.00
Direct labour (per unit)	16.00	4.00

In 2021, factory overhead costs and overhead activities for the two products are estimated as follows:

Cost Pool/Cost Driver	Budgeted Overhead	Expected Activity
	RM	Tablet	Smart Phone
Production Setups (no. of set-up)	80,000.00	5	15
Material Handling (kg)	70,000.00	1,000	4,000
Packaging and Shipping (boxes)	120,000.00	4,000	2,000

Required:

a. Compute the product cost per unit of tablet and smart phone using the traditional costing system.

b. Compute the product cost per unit of tablet and smart phone using the activity-based costing system.

c. Discuss two (2) reasons that may contribute to differences in profits calculating in (a) and (b).