Topic: Activity-Based Costing Systems

Humane Electronics Bhd (HE) produces specialized product that relates to pre-school gaming and mobile surveillance. At HE, product lines are charged for call center support costs based on sales revenue. Last year's summary of call center operations revealed the following: Mobile- Prue-School Surveillance Gaming , Products Number of calls for information 1,000 4,000 Average call length for information 3 minutes 8 minutes Number of calls for warranties 300 1,200 Average call length for warranties 7 minutes 15 minutes Sales revenue RM8,000,000 RM5,000,000 HE currently allocates call center support costs using a rate of 0.5% of sales revenue. REQUIRED: (a) Compute the amount of call center support costs allocated to each product line under the current system. (3 Marks) (b) Assume HE decides to use the average call length for information to assign last year's support costs. Does this allocation basis seem more appropriate than the percentage of sales? Why or why not? (3 Marks) (c) Assume HE decides to use the number of calls for information and for warranties to assign last year's support costs of RM65,000. Compute the amount of call center support costs assigned to each product line under this revised ABC system. (6 Marks)