TAG Metallic Inc. deals in main products, Metallic Doors and Window Frames.  There have been recent concerns about profit fluctuations, and there are concerns whether the products are appropriately costed and priced. TAG Metallic uses a cost margin pricing policy and uses a pre-determined overhead absorption rate based on direct labour hours for doors and machine hours for windows. The rate is calculated at the start of the year based on the following information: -

Production overhead                                       GHS 1,500,000

Direct labour hours                                                     60,000

Machine hours                                                             100,000

Set up hours                                                                2,000

The following additional information is provided upon preliminary investigations:

Metallic Doors             Window Frames

Production Volume   250 units                        100 units

Direct materials                                   GHS 350                     GHS 450

Ending value of materials                    GHS 80                       GHS 120

Net value of Work in progress GHS 60                       GHS (80)

Direct labour hours                                   20                                 25

Machine hours                                           50                                 60

Set up hours                                              2                                   2.5

Margin                                                      2/7                              20%

Direct labour rate                                 GHS 20                         GHS 15

Further analysis of production overheads and supporting information reveals the following:-

	Set up	Maintenance	Cutting	Assembly	Total
	GHS	GHS	GHS	GHS	GHS
Indirect	60000	60000	100000	100000	320000
Materials
Supervision			80000	120000	200000
Support costs	60000	60000	135000	180000	435000
Depreciation		25000	150000	50000	225000

You have been asked to analyse the information and make relevant calculations using traditional and activity costing methods, to inform decisions on pricing.

NB: maintenance and cutting are based on machine hours whiles assembly is on labour hours.

Required:

i. Calculate the predetermined overhead absorption rates used by TAG Metallic at the start of the year.                                                           

ii. Calculate the standard cost and the sales price of Doors and Windows, using the predetermined overhead absorption rate.

iii.  Calculate an activity based overhead absorption rate

iv. Calculate the cost and the sales price of Doors and Windows using the activity based overhead absorption rate.

B). Explain the differences in the operations of Coca-Cola bottling Ghana and Kpogas Furniture

C) Distinguish between Prime cost and Conversion cost, and could there be a situation where the two distinct cost terms are the same in cedi value? Give reason for your stand.