- 20 Marks
Question
a) Asase Aban Ltd pays some of the employees on a time basis but is subject to a monthly minimum wage of GH¢800 as directed by the Government of Ghana. For one of the months, the following data were extracted from the timesheet of the company:
| SRN | Name | Staff Number | Number of hours |
|---|---|---|---|
| 1 | Kwame Sarfo | K00324 | 262 |
| 2 | Ajoa Mansa | A00225 | 240 |
| 3 | Salomy Adiku | S00552 | 180 |
| 4 | Joseph Asiedu | J00654 | 332 |
| 5 | Thomas Tinge | T00724 | 204 |
The hourly rate was GH¢4.00, the minimum hours to be worked by each staff beyond which overtime can be paid is 224 per month. All overtime attracts a premium of GH¢1.50 per hour.
Required: i) Calculate the direct labour cost for the month. (8 marks) ii) Calculate the total indirect labour cost for the month. (2 marks)
b) Most businesses overlook their actual inventory cost, but in reality, the inventory price is more than its purchase price. It is because it includes the cost of ordering, as well as the cost of storing and maintaining until sales happen. Therefore, for assessing inventory value, every business must consider carrying or holding cost and ordering cost, together with the purchase price.
Required: i) State TWO (2) examples of inventory ordering costs. (2 marks) ii) State THREE (3) examples of inventory holding costs. (3 marks)
c) Explain TWO (2) uses of standard costing. (5 marks)
Answer
a) i) Calculation of direct labour cost for the month:
| Name | Hours Worked | Basic Pay (GH¢) | Overtime Hours | Overtime Pay (GH¢) | Total Direct Labour Cost (GH¢) |
|---|---|---|---|---|---|
| Kwame Sarfo | 262 | 1,048 | 38 | 57 | 1,105 |
| Ajoa Mansa | 240 | 960 | 16 | 24 | 984 |
| Salomy Adiku | 180 | 720 | 0 | 0 | 720 |
| Joseph Asiedu | 332 | 1,328 | 108 | 162 | 1,490 |
| Thomas Tinge | 204 | 816 | 0 | 0 | 816 |
| Total | 5,115 |
ii) Calculation of total indirect labour cost for the month:
| Name | Indirect Labour Cost (GH¢) |
|---|---|
| Kwame Sarfo | 57 |
| Ajoa Mansa | 24 |
| Salomy Adiku | 80 |
| Joseph Asiedu | 162 |
| Thomas Tinge | 0 |
| Total | 323 |
b) i) Examples of inventory ordering cost:
- The cost associated with the selection of suppliers.
- Processing of procurement, placing advertisements for the supply of goods, tender documentation, and meeting expenses. (Any 2 points @ 1 mark each = 2 marks)
ii) Examples of inventory holding cost:
- Rent of warehouse.
- Electricity cost.
- Insurance of stock.
- Deterioration of stock.
- Staff cost. (Any 3 points @ 1 mark each = 3 marks)
c) Uses of standard costing:
- To assign per unit costs to production to value inventory.
- To control overhead spending.
- To measure and evaluate the use of production capacity with respect to the incurrence of fixed overhead costs. (Any 2 points @ 2.5 marks each = 5 marks)
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