sumit agarawal 09kb028

8/3/2019 sumit agarawal 09kb028

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COST CONCEPT

PRESENTED BYSUMIT AGARAAWL

09KB028


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CASE STUDY OF COST SHEET

CAMPBELL Company is a metal and wood cutting manufactures,selling products to the home construction market. Consider thefollowing data for 2009.

Sand paper 20,000

Material holding cost 7,00,000 Lubricant and coolants 50,000

Misc. indirect manufacturing labour 4,00,000

Direct manufacturing labour 30,00,000

Direct materials inventory Jan1,2009 4,00,000

Direct material inventory Dec.31,2009 50,00,000 Finished goods inventory Jan1,2009 10,00,000

Finished goods inventory Dec.31,2009 15,00,000


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Work in process inventory Dec.31,2009 1,40,000

Plant-leasing costs 5,40,000

Deprecation plant equipment 3,60,000

Work in process inventory Jan1,2009 1,00,000

Property taxes on plant equipment 40,000

Fire insurance on plant equipment 30,000 Direct material purchased 46,00,000

Revenues 1,36,00,000

Marketing promotions 6,00,000

Marketing salaries 10,00,000

Distribution costs 7,00,000

Customer-service costs 10,00,000


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INFORMATION

1. Suppose that both the direct material cost and the plant leasingcost are for the production of 9,00,000 units. Assume that the plantleasing cost is a fixed cost and prepare the cost sheet.

2. . For all manufacturing items, classify costs as direct costs orindirect cost and indicate by V or F whether each is basically avariable cost or a fixed cost.

3. Suppose Campbell company manufacture 10,00,000 unit. Repeatthe computation in requirement 2 for direct materials and plantleasing costs. Assume the implied cost behavior patterns persist.

4. As a management consultant, explain concisely to the companypresident why the unit cost for direct materials did not change in

requirements 2 and 3 but the unit cost for leasing costs did change.


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Direct Factory Material


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Campbell CompanySchedule of cost sheet of goods manufactured

For the year ended December 31,2009

PARTICULAR AMOUNT RS AMOUNT RS

Direct material

Beginning inventory Jan1,2009Add: Purchase of direct materials

Cost of direct material avail for use

Less: Ending inventory,Dec31,2009

Direct material consumed

Direct manufacturing labour

Prime cost

4,00,000

46,00,000

50,00,000

5,00,000

45,00,000 (V)

30,00,000 (V)

75,00,000


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Indirect Factory Expenses


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FACTORY COST


Indirect manufacturing costs

Sandpaper

Materials-handling costs

Lubricants and coolants

Misc indirect manufacture labourPlant leasing costs

Deprecation plant equipment

Property taxes on plant equipment

Fire insurance on plant equipment

Add work in process Jan1 2009

Less work in process Dec31 2009

Factory cost

20,000 (V)

7,00,000 (V)

50,000 (V)

4,00,000 (V)5,40,000 (F)

3,60,000 (F)

40,000 (F)

30,000 (F)

1,00,000

1,40,000

21,40,000

(40,000)

96,00,000


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SELLING AND DISTRIBUTION


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SELLING AND DISTRIBUTION EXPENSES


Cost of goods manufacture

Add finished good inventory Jan 1Less finished good inventory Dec 31

Cost of goods sold

Marketing promotion

Marketing salaries

Distribution costs

Customer service costs

COST OF SALE

10,00,000

15,00,000

6,00,00010,00,000

7,00,000

10,00,000

96,00,000

(5,00,000)

91,00,000

33,00,000

1,24,00,000


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SALES REVENUE


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SALES REVENUE

PARTICULAR AMOUNT RS AMOUNTRS

Cost of SALE

Profit

Total revenue

12,00,000

1,24,00,000

12,00,000

1,36,00,000


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DECISION MAKING


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Impact of fixed cost and variable cost in different production line

FOR 9,00,000 UNIT

Direct material unit cost(V) = direct material used = 45,00,000 =Rs5 per unit

unit produced 9,00,000

Plant leasing unit cost (F) = plant leasing costs = 5,40,000 =Rs0.6per unit


FOR 10,00,000 UNIT

Direct material unit cost(V) = direct material used = 50,00,000 =Rs5 per unit


Plant leasing unit cost (F) = plant leasing costs = 5,40,000 =Rs0.54per unit



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BEP and PV ratio analysis Contribution =Sales variable cost

1,36,00,000

81,30,000 = 34,70,000

PV ratio= Contribution *100 = 34,70,000 *100 =25.15%

Sales 1,36,00,000

BEP (RS) = Total fixed cost = 9,70,000 = RS 385659

PV ratio 25.15%


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Managerial decision

Manager should more emphasis in maximum utilizationof resources.

The BEP of this product is RS 385659 so if thecompany produce this much amount of goods then the

company will face no profit no loss . The increase in production does not lead to decrease

in variable costbut the fixed cost will reduced. To increase the profit the total cost is to be reduced.

Manager should take important decision regarding themaximization of output


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sumit agarawal 09kb028