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
PARTICULAR AMOUNT RS AMOUNT RS
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
PARTICULAR AMOUNT RS AMOUNT RS
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
unit produced 9,00,000
FOR 10,00,000 UNIT
Direct material unit cost(V) = direct material used = 50,00,000 =Rs5 per unit
unit produced 10,00,000
Plant leasing unit cost (F) = plant leasing costs = 5,40,000 =Rs0.54per unit
unit produced 10,00,000
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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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