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Question 3 (Total: 25 marks) Almari Magick has a single production process for which the following costs have been estimated for the period ending 31
Question 3 (Total: 25 marks) Almari Magick has a single production process for which the following costs have been estimated for the period ending 31 December 2019: Material receipt and inspection cost Power cost Material handling cost RM 15,600 19,500 13,650 Three products; X, Y and Z - are produced by workers who perform a number of operations on material blanks using hand-held electrically powered drills. The workers have a wage rate of RM4 per hour. The following budgeted information has been obtained for the period ending 31 December 2019: Product X 2,000 10 Product Y 1,500 5 Product z 800 16 Production units Batches of material Data per product unit: Direct material (square metres) Direct material (RM) Direct labour (minutes) Number of power drill operations 4 5 24 6 6 3 40 3 3 6 60 2 Overhead costs for material receipt and inspection, process power and material handling are presently each absorbed by product units using rates per direct labour hour. An Activity-Based Costing (ABC) investigation has revealed that the cost drivers for the overhead costs are as follows: Material receipt and inspection number of batches of material Process power: number of power drill operations Material handling: quantity of material (square metres) handled You are required to: a) Calculate the budgeted product cost per unit for each of products X, Y and Z for the period ending 31 December 2019 detailing the unit costs for each cost element: (1) using the existing method for the absorption of overhead costs and (10 marks) using an approach which recognizes the cost drivers revealed in the ABC investigation (10 marks) (ii) b) Explain the relevance of cost drivers in activity-based costing. Make use of figures from the summary statement prepared in (a) to illustrate your
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