Reference no: EM132858302
Question - Panda Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, MEGA and LIGA, about which it has provided the following data:
|
|
MEGA
|
LIGA
|
|
Direct materials per unit
|
RM10.20
|
RM50.50
|
|
Direct labor per unit
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RM8.40
|
RM25.20
|
|
Direct labor-hours per unit
|
0.40
|
1.20
|
|
Annual production
|
30,000
|
10,000
|
The company's estimated total manufacturing overhead for the year is RM1,464,480 and the company's estimated total direct labor-hours for the year is 24,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:
Activities and Activity Measures Estimated Overhead Cost (RM)
Supporting direct labor (DLHs) 52,000
Setting up machines (setups) 132,480
Parts administration (part types) 780,000
Total RM1,464,480
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|
MEGA
|
LIGA
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Total
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|
Supporting direct labor
|
12,000
|
12,000
|
24,000
|
|
Setting up machines
|
864
|
240
|
1,104
|
|
Parts administration
|
600
|
960
|
1,560
|
Required -
a) Determine the manufacturing cost per unit of each of the company's two products under the traditional costing system
b) Determine the manufacturing cost per unit of each of the company's two products under activity-based costing system
c) Which product is overcosted and which product is undercosted?
d) Calculate the distortion cost.
e) What is the impact if Panda Manufacturing Corporation use traditional costing system?