PLEASE SHOW ALL WORKING

Question 1:

Management was very concerned that their traditional method of costing may no longer be appropriate and wanted to consider using the ABC costing method. It has been suggested that three Cost pools be established, with the following cost Drivers, and the Overhead cost be shared among them as follows:

Cost Pool	Amount	Cost Driver
Assembling	$ 50,000	Labour cost
Manufacturing	$ 54,000	Labour Hours
Inspecting	$ 16,000	Number of Inspections

In the month of January, the following production data was recorded:

	Refrigerators	Stoves
Units produced	15,000	25,000
Direct Materials Used	$ 75,000	$ 125,000
Direct Labour Cost	$ 40,000	$ 72,000
Direct Labour Hours	12,000	15,000
Number of Inspections	300	500
Work in Progress at the start of the month	$ 12,500	$ 14,000
Work in Progress at the end of the month.	$ 7,500	$ 12,000

Manufacturing Overheads for the month amounted to $ 120,000 and this was allocated equally between the two products, using the traditional approach.

You were asked to:

1. Prepare a report showing the manufacturing cost of each Refrigerator and each Stove. 10 Marks
2. Prepare a cost of production report using the ABC approach. 20 Marks