QUESTION 1 The following information provides details of the cost, volume and cost drivers for the particular period in respect of ABC & Co. Products X Y Z Total Production and sales (units) 30,000 20,000 8,000 Raw material usage (units) 5 5 11 Direct material cost GHS 25 GHS 20 GHS 11 GHS 1,238,000 Direct labour hours 1 2 1 88,000 Machine hours 1 1 2 76,000 Direct labour cost 8 12 6 Number of production run 3 7 20 30 Number of deliveries 9 3 20 32 Number of receipts 15 35 220 270 Number of production orders 15 10 25 50 Overhead Cost: GHS Set-up 30,000 Machines 760,000 Receiving 435,000 Packing 250,000 Engineering 373,000 1,848,000 In the past the company has allocated overhead to products on the basis of direct labour hours. However, the majority of overheads are more closely related to machine hours than direct labour hours. The company has recently redesigned its cost system by recovering overheads using two volume-related bases: machine hours and material handling overhead rate for recovering overheads of the receiving department. Both the current and previous cost system reported low profit margin for product X, which is the companys highest selling product. The management accountant has recently attended a conference on activity-based costing and the overhead cost for the last period have been analysed by major activities in order to compute activity-based costs. Required: (a) Compute the product cost using a traditional volume-related costing system based on the assumptions that: i. All overheads are recovered on the basis of direct labour hours ii. The overheads of the receiving department are recovered by a material handling overhead rate and the remaining overheads are recovered using a machine hour rate. (5 marks) (b) Compute product costs using an activity-based costing system. (10 marks)