1.

1 classify different types of cost

fixed cost : means cost thats we pay as a salaries, rent, advertising, insurance, and legal fees

this cost is fixed are not change

variable cost : this cost we always pay it, but we are not expect how much we will pay
because it base on size of production such as, raw material, labor (paid by the hour ), freight
out.

semi variable cost : this cost contain both fixed and variable cost ( mixed cost )

will be incurred as a function of activity volume

for examples : maintenance, billing structure for a cell phone and electricity.

Cost classifications :

A. Material : raw material use to manufacturing products

divided into:

1. direct material : the material which used to manufactured product.

For example (milk for ice cream and wood for furniture )
2. indirect material : that is not traceable into specific units.
For example ( tracing and paper in sanding machinery .

B. Labour : in general anyone work in the factory cost of salaries and wages paid to them
Divided into :
1. direct labour : labor cost for workers who associated with the final products .
2. indirect labor : not directly involved with specific units .
for example: ( maintenance engineers or production supervisor )

c. manufacturing overhead : costs are paid by the company are not relate in
production line , but its important for it
for example : ( depreciation, repair and maintenance, property tax, insurance,
utilities and rent of factory building )

1.2 use different costing method

Direct material Conversion cost
Beginning balance 8,450 0
Ending balance 6,000 6,000 6,000
In process unit 2,450 2,450 2,450*30%
Total equivalent 8,450 6,735

cost per unit 6,000/8,450 = 0.77

cost per unit conversion cost = 4,000/6,735 = 0.59
 1. national work complete certified + work uncertified expenses
2. profit recognize profit : national profit (work complete certified / contract capital )

contract price
number ff421
working complete certified : 12,000
+uncertified 6,000
-expense 6,500
National profit = 11,500
11,500 *( 12,000/25,500) =5,520

3. Job cost = direct material+ direct labor + manufacturing overhead

5,000+10,000+ (10,000*60%) =21,000
Cost per unit 21,000/7000 = 3 per unit
Cost sold unit 3*1,000 = 3,000

1.3 calculate using cost appropriate using technique

1. manufacturing overhead rate
assembly= total cost / total activity
18,500/6,166 = 3hour
Application procedure =
7980/5320 = 1.5 application
Examination = 15,200/724 = 21hour
2. overhead allocation
assembly =manufacturing overhead rate * annual machine hour
3*500 = 1500
Application = 1.5*85 =127.5
Examination = 21 *20 =420
Total overhead =
1,500+127.5+420 = 2047.5

Cost per unit =direct material +direct labor + manufacturing overhead

Manufacturing overhead per unit = 2047.5 /400unit = 5.11

52+38+5.11 = 95.11

Profit unit = selling price cost per unit =120-95.11= 24.89

 marginal cost

Direct material = 40*7,700=308,000

Direct labor= 34*7,700=261,800

Variable overhead = 3*7,700=23,100

Total marginal cost per unit produced =592,900

Cost of goods sold =beginning inventory + purchased ending inventory

Direct material = 200*40=8,000

Direct labor = 200*34= 6,800

Variable overhead = 200*3 = 6,00

Ending inventory = 15,400

Cost of goods sold= 0 +592,900-(15,400)=577,500

absorption = direct material = 40*7,700 = 308,000

direct labor = 34*7,700 = 201,800
variable overhead = 3*7,700 = 23,100
fixed overhead = 3*7,700 = 23,100
total absorption = 616,000
ending inventory =
direct material = 200*400 =8,000
direct labor = 200*34 = 6,800
variable overhead = 200*3 = 600
fixed overhead = 200*3 = 600
ending inventory = 16,000

cost of goods sold = 0 + 616,000 (16,000) = 600,000

 3. first in first out
sales = 3*20=60
3*15=45
5*15= 75
2*18=36

Date purchased sales balance

October.1 3unit *20=60

October.2 8 *15=120 3*20=60

8*15=120
=180
October.6 6 unit
3*20
3*15

October.15 4*18=72 5*15=75

4*18=72
Total=147
October.20 5*15=75 2*18=36
2*18=36

weighted average

Date Purchased Sale balance

October.1 3*20=60

October.2 8*15=120 3*20=60

8*15=120
=180
Total weighted
average =3+8=11
180/11=16.36
16.36*11

October.6 6*16.36=98.16 5*16.36=81.8

October.15 4*18=72 Total weighted

average=9(5+4)
Total cost
=81.8+72=153.8
153.8/9=17.08
October.20 7*17.08=119.56 2*17.08=34.16
 1.4 analyze cost data using appropriate techniques

1. marginal cost = direct material + direct labor + variable overhead

3+1+2 = 6
Contribution margin = target profit + excluded cost / cost * number of unit
160,000+ 40,000 +20,000+100,000 / (6*80,000) = 0.66
Price = cost + ( cost * contribution margin )
6 +(6*0.66 ) = 10

2. absorption = direct material + direct labor + variable overhead + fixed overhead

3+1+2+0.5 = 6.5
Contribution margin =
160,000+20,000+100,000 / 6.5*80,000 = 0.54
Price = 6.5 +( 6.5 * 0.54 ) = 10

3. total cost = material + direct labor + variable overhead + fixed overhead+ variable
managerial and sale expense + fixed managerial and sale expense
= 3+1+2+0.5+0.25+1.25=8
Contribution margin = 160,000 + 0 / 8*80,000 = 0.25
Price = 8 +( 8 * 0.25 ) = 10

breakeven point
breakeven point = fixed cost + fixed marginal / selling price per unit variable cost
per unit =
40,000 +20,000 / 10-7.25 = 21.818
Contribution margin ratio = contribution margin per unit / selling price
2.75/10
Breakeven point = 60,000 / 2.75

2.1prepar and analyze routine cost reports

1-prime cost

Elements Amount total

Raw material 33,000
Productive wages 35,000
Direct expenses 3,000
71,000
2-factory overhead

Elements Amount total

Factory rent and tax 2,200
Factory stationary 7,500
Unproductive wages 10,500
Factory lighting 1,500
Water supply 1200
Factory heating 4,400
Rent ware house 300
Factory insurance 1,100
Factory cleaning 500
Tools written off 600
Director fees 1,000
Motive power 3,000
Depreciation 2,000
29,050

3-adninstration

Elements amount total

Office exp 800
Directors fees 2,000
Office insurance 500
Offices stationary 900
Sundry office 200
Office legal exp 400
Offices rent tax 500
Offices depreciation 1,000 6.300

4-Distribution

Elements Amount total

Sales department salaries 1,500
Advertising 300
Bad debt 100
Delivery vehicle 200
Commission on sales 1,500
Up keeping delivery van 700
4,300

5-finance cost

Elements Amount total

Bank change 50 50

Total routine cost report

1-total prime cost 7,100

2-total factory over head 29,050

3-total administration cost 6,300

4-total finance cost 50

Total all cost =110,700

Cost per unit =110,700/10,000=11.07

2.2 use performance indicators to identify potential improvements .

1. efficiency
technology efficiency =
number of unit output / number of input
60,000/70,000 = 6
2. economic efficiency = value of output / value of input
number of output * price / number of input * price of input
480,000/60,000 = 8
3. productivity = economic efficiency* price coverage
8*1.5 = 12
3.3 prepare budgets according to the chosen budgeting method

Details January February march

Sale unit 5,000 4,000 6,000
Sale price 35 35 35
Total sale budget 175,000 140,000 210,000
 2-production budget

Details January February march

Sale unit 5,000 4,000 6,000
(beginning balance) (1,000) (800) (1,200)
+ending balance 800 1,200 1,000
Total production 4,800 4,400 5,800
budget

3-material budget

details January February march

Production unit 4,800 4,400 5,800
Required material 4 4 4
per unit
Total required 19,200 17,600 23,200
Rate per unit 2.5 2.5 2.5
material
Total material 48,000 44,000 58,000
budget

4-labor budget

details January February march

Production unit 4,800 4,400 5,800
Labor hour 0.75 0.75 0.75
required
Total required 3,600 3,300 4,350
Labor rate 3.5 3.5 3.5
Total labor budget 30,000 28,050 36,975

5-variable overhead budget

details January February march

Total required 3,600 3,300 4,350
Variable overhead 8 8 8
rate
Total variable 28,800 26,400 34,800
overhead budget

6-total production cost budget

details January February march
Total material 48,000 44,000 58,000
budget
Total labor budget 30,600 28,050 36,975
Total variable 28,800 26,400 34,800
overhead budget
Fixed overhead 3,000 3,000 3,000
Total production 110,400 101,450 132.775
cost

3.4 prepare a cash budget

3.4

element January February march

Cash receipts
Cash receipts from 2000
December sales
Sale in jan
(175.000/1.25) 140.000 35.000
Sale in feb
(140.000/1.25) 112.000 28.000
Sale in march
(210.000/1.25) 168.000
Total cash reapets 142.000 147.000 196.000
Cash payment
Dec payable paid 15.000
Administrative cost 9.400 9.400 9.400
Dividends paid 8.000
Material purchase
in January
(44.800/1.25) 35.840 9.400
Material in feb
(46.800/1.25) 37.440 9.360
Material in march
(56.400/1.25) 45.120
labor 30.600 28.050 36.795
Variable over head 28.800 26.400 34.800
Fixed over head 3000 3.000 3.000
Income tax 33.900
Total cash payment 122.640 113.250 180.555
Net cash 19.360 33.750 15.445
Cash receipts-cash (142.000-127.640) (147.000-113.250) (196.000-180.555)
payment
Cash beginning 20.000 39.366 73.110
balance
Cash ending 39.360 73.380 88.555
 balance

4.1 calculate variances, identify possible causes and recommend corrective action

Budget Actual
1. people 200 150
2. hot dog .25 .6
Pop .45 .55
Condiments .05 .1
Nachos .18 .2
3. unit to be sold
Hot dog 400 150
Pop 300 200
Condiments 400 150
Nachos 400 150

1. people variance : 200-150=50 Adverse

2. sale profit variance : (400-150)*0.52 = 130 Adverse
3. pop= (300-200)* 0.55 = 55 adverse
total profit variance = 130+55 = 185 adverse
4. condiments = (0.05-0.1 ) *150 = -7
5. nachos (0.18 -0.2 ) *150 = -3 Adverse
total variance = 52.5+20+7.5+3=83 adverse

3.cost variance :
Actual unit
1 . hot dog = (.25-0.6 ) * 150 = 52.5 adverse
3. pop = (0.45-0.55 ) *200 = -20 adverse

4.2 prepare an operating statements reconciling budget and actual result

Budget statement
Details Working Amount total
Revenues
Hot dog 400 (1) 400
 Pop 300 (1) 300
Total revenues 700
- expenses
Variable cost
Hot dog 400 (.25 ) 100
Pop 300 (.45) 135
nachos 400 ( .18) 72
Condiments 400 (.05) 20
Total variable cost 327
+ Fixed cost 50 50 50
Total expenses (377)
profit 323
actual
Details Working Amount Total
Revenue
Hot dog 150 150
Pop 200 200
Total revenue 350
- expenses
Hot dog 150 (.6) 90
Pop 200(.55) 110
Nachos 150(.2) 15
condiments 150(.1) 30
Total variable cost 245
+ fixed cost
Fees 10
Rent 50
Napkins 5.55
Total fixed cost 65.55
Total expense 310.55
Profit actual 39.45

budget profit actual profit =

323 -39.45 = 283.55