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SHOOT QUESTION 1 (1A) Activity Cost Pool Labour related Machine related Quality control PMMC Ltd manufactures custom jewelry. The company has in the past been
SHOOT QUESTION 1 (1A) Activity Cost Pool Labour related Machine related Quality control PMMC Ltd manufactures custom jewelry. The company has in the past been using a traditional overhead allocation system based solely on direct labour hours. Sensing that this system was distorting costs and selling prices, it has decided to switch to an activity-based costing system using three activity cost pools. Information on these activity cost pools are as follows: Estimated Activity Estimated Overhead Costs (GHS) 8,000 direct labor hours 40,000 12,500 machine hours 50,000 800 number of inspections 12,000 During the period, Job number 419 recorded the following: Direct materials GHS900 Direct labour 30 hours at GHS40 per hour Machine hours 80 Number of inspections - 5 It is company policy to earn a profit margin of one-sixth. Required: i. State any three (3) factors to be considered in selecting a cost driver. (1.5 marks) ii. Compute the cost drivers' rates for Swaggering ladies for the year 2020 (1.5 marks) iii. Determine the cost, and hence, the selling price of Job number 309 under the activity-based costing system (4 marks) (IB) 1. State five (5) reasons for stock discrepancies revealed during physical stock counts (2.5 marks) it. Distinguish between cost control and cost reduction (4 marks) iii. Outline three (3) techniques and principles used in cost control (1.5 marks) (TOTAL: 15 MARKS)
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