The document provides an overview of various cost analysis concepts for entrepreneurs, including defining key terms like cost centers, cost units, cost accounting, costing, and the principles of cost accounting. It also discusses the differences between cost accounting and financial accounting, concepts like marginal costing, variable costs, contribution, and break-even analysis.
1.Distinguish between the direct and indirect labor cost
2. Understand the various facets of labor cost control
3. Understand the concepts like labor turnover, time keeping, time booking and idle and overtime
4. Know the various methods of remuneration including incentive plans
5. Understand the pay roll accounting and disbursement of wages.
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
1.Distinguish between the direct and indirect labor cost
2. Understand the various facets of labor cost control
3. Understand the concepts like labor turnover, time keeping, time booking and idle and overtime
4. Know the various methods of remuneration including incentive plans
5. Understand the pay roll accounting and disbursement of wages.
A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
1. to understand the basic principles of Material Control
2. to study the procedures of Purchase, Storing and Issues
3. to acquaint with the latest techniques in inventory control
4. to understand the pricing of issues
01.Understand the concept of ‘Overheads’.
02.Understand classification, allocation, apportionment and absorption of overheads.
03. Understand the Primary and Secondary Distribution of Overheads.
04. Understand the Traditional & Activity Based Costing methods
05. Identify the value added & non value added activity
Introduction of costing , its elements & cost sheetKamlesh Shinde
Basically presentation is based on the costing , its various elements, their classification and the illustration on a simple cost sheet and Estimated Cost sheet. It is very useful to beginners in cost accounting , B.Com and M.com Students.
1.1 identify the elements of costs
1.2 understand various classification of costs
1.3 identify the cost unit
1.4 identify the cost center
1.5 exercise regarding costs concepts
1. to understand the basic principles of Material Control
2. to study the procedures of Purchase, Storing and Issues
3. to acquaint with the latest techniques in inventory control
4. to understand the pricing of issues
01.Understand the concept of ‘Overheads’.
02.Understand classification, allocation, apportionment and absorption of overheads.
03. Understand the Primary and Secondary Distribution of Overheads.
04. Understand the Traditional & Activity Based Costing methods
05. Identify the value added & non value added activity
Introduction of costing , its elements & cost sheetKamlesh Shinde
Basically presentation is based on the costing , its various elements, their classification and the illustration on a simple cost sheet and Estimated Cost sheet. It is very useful to beginners in cost accounting , B.Com and M.com Students.
1.1 identify the elements of costs
1.2 understand various classification of costs
1.3 identify the cost unit
1.4 identify the cost center
1.5 exercise regarding costs concepts
This presentation contains functions of human resources management, recruitment process, types of wage payment plans, selection procedure, types of wage incentives plans. For wage payment I have provide various examples.
Marketing plan for new solar-power lawn mowerTrang MeMe
It was my marketing presentation in class. The purpose of presentation is to sale to products but not marketing process.
I focused on evaluate the market and support the increase of customer awareness to the product.
Product: Lawn mower used Solar power
Company: Cutterz (imagined) located in Finland.
Market: United State
p/s: My first time ever trying infographic technic :)
Robotic Lawn Mower Market Expected to Hit 1987 Million USD By 2021Ranjith Rama
Get Sample Brochure of Report @ http://www.marketintelreports.com/pdfdownload.php?id=1601-04
The research report presents a comprehensive assessment of the market and contains thoughtful insights, facts, historical data, and statistically supported and industry-validated market data.
Marginal costing is a costing technique wherein the marginal cost, i.e. variable cost is charged to units of cost, while the fixed cost for the period is completely written off against the contribution.
Different techniques of costing in strategic management accounting discussed.
Marginal costing,budgetary control, standard costing,Activity based costing,responsibility costing.
As a manager, discuss how you would use or have used the concepts .docxwraythallchan
As a manager, discuss how you would use or have used the concepts
1) Cost-Volume-Profit Analysis
2) Importance of Profit- cost- volume analysis
3) Variable Costing in Planning
4) Importance of Variable costing
Instrcutions:
1) Original post for two different topics total 600 words
2) 3 Responses to classmates = 450 words total
3) 3 articles/peer reviewed references for one question and 3 Articles/Peer Reviewed references for other question.
4) Citation required in the body.
5) APA format
Response#1(Mahesh)
Cost-Volume-Profit Analysis is observed as the employment of a model that helps in breaking down the complexity that exists between cost of production and operation, quality of goods produced, and the profits generated from the whole undertaking (Lulaj & Iseni, 2018). CVP takes into consideration the influence each aspect of operation or production unit has on the running of an organization. It stipulates the expenses that are to be incurred in a given operation by considering the fixed and variable costs that come with production of a good or a service or yet the sale of a product. This makes it an essential tool in the control of budgetary allocation in an organization as it provides the necessary information that gives direction on the combined activities that are likely to add value to an investor's capital (Serfling, 2016). A major example may be stipulated in the production of a food product, which seems to gain demand on weekends. In such a case, the business producing the product will commit its resources elsewhere during the weekday to optimize on the scarce resources and avoid drowning in expenses example fixed costs such as rent and utilize its production unit to meet the accruing demand on weekends.
Thus, it is without a doubt to state that CVP Analysis is a major tool of planning used in managing risks, optimizing on the scarce resources which are all essential in enhancing customer satisfaction (Lulaj & Iseni, 2018). Essentially, CVP provides information that is crucial in the control and planning of production, among other operational activities in an organization.
Variable Costing
Variable costing revolves around the assigning of the period and product costs in regards to a given kind of product. Researchers observe that it is an essential approach in internal reporting due to its ability to break the complexity that comes along with an organization’s operation and production (Creese, 2017). It addresses costs product costs related to manufacturing and specifically those that can be directly attributed to a product. In this case, it provides enough information that is crucial in controlling the production sector and makes plans through strategies such as budgetary allocation (Serfling, 2016). This is so in that it provides the relationship between the expected and actual costs and through this it becomes easier for the management to schedule their operations, which’s crucial in maximizing the .
The term ‘cost’ has a wide variety of meanings. Different people use this term in different senses for different purposes. For example, while buying a book, you generally ask, “how much does it cost”? Here the cost means price.
The costing terminology of the Institute of Cost and Works Accountants,London defines cost as “the amount of expenditure incurred on or attributable to a given thing”.
Costing is the technique and process of ascertaining costs. In simple words costing is a systematic procedure of determining the unit cost of product/service.
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3. What is a cost centre ? Cost centre means, a production or service location, function, activity or item of equipment whose costs may be attributed to cost units.
4. What is a cost unit ? It is a unit of product or service in relation to which costs are ascertained.
5. What is cost accounting ? It is the establishment of budgets, standard costs and actual costs of operations, processes, activities or products, and the analysis of variances, profitability or the social use of funds.
7. What are the principles of cost accounting ? Cost should be related to its cause Abnormal costs should be excluded Cost should be properly recorded
8. What is the difference between cost accounting and financial accounting ? Financial accounting is historic and based on actual data. It puts the total profit / loss of the company. It is based on transaction with the external firms. Cost accounting is based on partly actual and partly estimated values. It is based on data relating to internal working of the company. It focuses on individual product / service – rather than total profit / loss of the company.
9. What is marginal costing? In this system, only variable costs are accumulated and cost per unit is ascertained only on the basis of variable costs As against this in Absorption costing, we take into account both fixed costs and variable costs.
10. What is variable cost ? There are some costs which are directly dependent on production volume. If production volume will increase, these costs will also increase and vice versa. Fixed costs are those, which dont change with change in scale of production / level of activity. They will remain same whatever may be the scale of production. But the variable costs are moving in direct relation to volume of production.
11. What is contribution ? It is the difference between selling price and variable cost it can be expressed as per unit contribution or as total contribution example : selling price per unit = 10, variable cost per unit = 6, contribution per unit = 4
12. Is contribution same as profit ? NO profit is calculated only after considering all the costs – fixed and variable contribution takes into account only variable costs.
13. Which inventory will be more – marginal cost or full cost based Full cost based the reason is simple : in full cost (also called absorption cost or conventional cost) all manufacturing costs, both fixed and variable are charged to product cost.
14. WHAT IS DISCRIMINATING PRICE AND DIFFERENTIAL SELLING Discriminate = to charge different prices differential = to have differnt approach in selling In marginal costing, it is possible to charge different prices on different occasion. If you have surplus production capacity lying idle, you may go for lower contribution and thus charge lower price. Later if you get another offer – which is for higher price, you may go for that.
15. What is CVP chart / BEP chart ? CVP = cost volume profit (showing relation between cost, revenue and profit) BEP = break even point – the point where there is no profit – no loss CVP Chart is a graphic relationship between costs, volume and profits. It shows not only the BEP but also the effects of costs and revenue at varying levels of sales.
16. What is Margin of Safety? It shows the difference between the actual sales and sales at break-even point formula : sales – BEP level EXAMPLE : fixed cost =1000, contribution = 20%, Sales = Rs. 12000, what is margin of safety ? BEP = 1000/20% =5000 margin of safety=12000-5000 = 7000 answer
17. Calculate BEP if Sales are Rs. 1,50,000, producing a profit of Rs. 4,000 in period I. Sales are Rs.1,90,000, producing a profit of Rs. 12,000 in period II. Formula = %change in profit / % change in sales or change in profit / change in sales = 8000/40000 * 100 = 20% answer
18. What is composite BEP ? When you make different products, you can have composite BEP, which is calculated on the basis of combination of different products / services.
19. What are the approaches to calculate composite BEP? There are 2 approaches : 1. constant product mix 2. variable product mix
20. What is unit costing ? Unit costing refers to the costing procedure, which is ideally used in case of concerns producing a single article on large scale by continuous manufacture.
21. What is contract costing ? Contract costing is that form of specific order costing which applies where work is undertaken as per customers’ special requirements and each order is of long duration.
22. What is cost plus contract ? Cost plus contract is a contract where the contractee agrees to pay to the contractor the cost price for the work done on the contract plus an agreed percentage thereof by way of overhead cost and profit
23. What is escalation clause? It is usually provided in the contract as a safeguard against any likely changes in the price or utilisation of material and/labour. Example : after the allotment of contract, the prices go up by 10%. There is 10% escalation clause, thus the contract price will also goup by 10%
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25. What is cost sheet ? It is a statement which shows different costs and classifies them in different heads as under : 1. prime cost= (direct material + direct labour + direct expenses) 2. works cost / factory cost= (prme cost + factory overhead) 3. cost of production =(works cost + administrative overhead) 4. cost of sales =(cost of production+sales cost)
26. What is the difference between cost sheet & production account ? Cost sheet is a statement, but production account is a type of account. Cost sheet classifies costs in different categories like prime cost etc. But production cost only puts them without classification cost sheet is based on both actual & estimated values, but production account is based on actual data.
27. Material management sytems There are many systems like : 1. ABC 2. two bins system 3. perpetual inventory control system 4. poka yok 5. kaizen
28. What is ABC ? ABC analysis is a tool to classify inventory into 3 categories : A = very costly items, these are in small numbers, but these require special attention – they have 90% of the total investment in inventory B=medium priced C = bulky but low priced items. In terms of volume, they occupy 90% of space, but in terms of value, they have only 2-5% of value. Last priority should be given to them.
29. What is Perpetual inventory management system? Perpetual inventory system is a method of recording stores balances after each receipt and issue to facilitate regular checking and obviate closing down for stock taking. Here we take physical verification of stock on every receipt and issue. It is advisable in the case of costly goods, precious items in inventory. Example : a jewellery making firm has to maintain perpetual inventory system
30. What are the components of perpetual inventory management system? There are 3 components : 1. bin record 2. stock ledger 3. continuous stock taking
31. What is bin record? Bin means the physical stock of goods. Bin refers to the box containing inventory item. On the bin, there is a record of goods. When goods arrive, the record is updated. When goods are issued, the quantity is reduced.
32. What is a stock ledger? It is maintained by store keeper. It is a record of the goods in godown. Stock ledger is like any ledger. Here we have proper record of entry and disposal of stock. Details like date of issue, etc. Are properly maintained. Proper vouchers (like good issue note) etc. Are also kept.
33. What is continuous stock taking? In perpetual inventory system, we regularly undertake stock taking. In this process, we compare inventory as per bin to the inventory as per stock ledger. Thus there is continuous comparison of the bin to stock ledger to identify discripancy if any.
34. What is Kaizen? It is continuous improvement of processes in manufacturing, engineering, supporting business processes, and management. It can be applied in any sector. Thus it can be applied in inventory management also. Here we try to innovate, humanise and improve the work processes through participation of workers and by introducing a reward system for those workers, who introduce some innovation.
35. What is Poka Yoke ? It is a Japanese technique for minimising errors. Yoke = production, Poka = mistake it is a mistake proof system. Here we try to introduce a system, which is fool-proof it is used in the case of lean manufacturing system (lean manufacturing is based on Just in time philosophy – means keep minimum inventory, manufacture when you really need).
36. What is Muda, Mura , Muri ? These are japanese management techniques. Muda means waste. Mura means unevenness and muri means to inconcistency. These three terms denote wastes – which should be avoided in production process or in inventories.
37. What is JIT? Just in Time - it is a system of Japanese management – where there is no inventory - raw material is procured when it is really required. Goods are made to order. If there is no order – dont make. It is also a part of lean manufacturing system – where you make as much as is required. It enables companies to be very flexible, agile (agile manufacturing) and quick to respond.
38. What is EOQ? Economic Ordering Quantity (EOQ) is that size of the order which gives maximum economy in purchasing any material and ultimately contributes towards maintaining the material at the optimum level and at minimum cost. It is calculated using a formula : =sqrt (2 * ordering cost * annual requiements / carrying cost).
39. What is FSN analysis ? F=FAST MOVING S=SLOW MOVING N=NOT MOVING it is an inventory management technique, where we classify inventory items into F / S / N items and try to give more attention to F items. We try to dispose off N items (not moving) so that we are able to manage inventory properly
40. What is Min-Max analysis ? It is a type of inventory management system here you fix up minimum and maximum levels.
41. What is two bin system? There are two bins here : 1. one bin contains materials to be used. 2. 2 nd bin contains material to be used after 1 st bin is empty. If the first bin is empty, inventory order is placed and by the time the goods arrive, the 2 nd bin is used.
42. Example of material costing 2,000 kgs. of material valued at Rs. 8,000 were issued for the manufacture of medium sized cartons. 2,400 Nos. medium sized cartons including 320 damaged cartons weighing 0.50 kg. each were manufactured. 480 kg. of offcuts were used for the manufacture of small sized carton. This would have amounted to Rs. 1,000. 320 medium sized cartons were damaged and rectification costs came up to Rs. 160. 120 kg. of offcuts were sold as scrap for Rs. 20. You are required to calculate the cost of one medium sized carton assuming that there are no opening or closing stocks.
43. Solution ... Cost of raw material = 8000 less material used for small cartons = 1000 add repairing charges = 160 less scrap = 20 final cost = 7140 items made = 2400 cartons cost per carton = 2.98 per carton. Answer
44. Calculate reorder level ? Monthly demand (units) 250 - Cost of placing an order (Rs.) 100 - Annual carrying cost (Rs. per unit) 15 - Normal usage (units per week) 50 - Minimum usage (units per week) 25 - Maximum usage (units per week) 75 - Re-order period (weeks) 4-6
45. solution Reorder level is the level when we will place an order for goods. When inventory reaches reorder level, we will place the order to the supplier. Formula = maximum consumption * max. Delivery time =75 * 6 = 450 iunits
46. What is maximum inventory in this example ? Maximum inventory = (reorder level + EOQ) – (minimum use * min. Time) so first calculate EOQ EOQ= sqrt((2 * 12*250*100) / 15) =200 Max. Inventory= (450+200)-(25*4) =550 answer
47. What is minimum inventory in this example ? Formula = reorder level – (normal usage * normal delivery time) = 450 – (50 * 5) =200
48. What is bill of material ? A bill of materials is a comprehensive list of materials with specifications, material codes and quantity of each material required for a particular job prepared by = production planning deparment sent to : 1. stores 2. cost dept. 3. accounts 4. purchase dept.
49. What is Material Requisition Note? It is a formal written demand or request usually from the production department to the stores for the supply of specified materials, stores etc. Prepared by = production dept. Issued to = stores department to issue stock it is prepared in triplicate 1 st copy – to stores, 2 nd copy – to cost dept. 3 rd copy = record copy
50. How to treat waste / spoilage ? These are of two types : 1 normal 2. abnormal normal loss is adjusted into the goods. (for example suppose 5 units are wasted, it is reduced from the finished goods. Abnormal loss is transferred to costing profit and loss department.
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52.
53. What is Kanban? It has evolved out of Toyota manufacturing system. It is a part of Just in time inventory management system. Here signals are passed for supply of goods. It is a signaling system to trigger action. As its name suggests, kanban historically uses cards to signal the need for an item. However, other devices such as plastic markers (kanban squares), balls (often golf balls), an empty part transport trolley, or simply a floor location can also be used to trigger the movement, production, or supply of a unit in a factory.
54. What is Jidoka ? It is also Japanese management work. It means to use automation.
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56. What are different components of costs ? Material + labour + other costs or direct cost + indirect cost or direct material + direct labour + direct expenses + indirect material + indirect labour + indirect expenses
57. What constitute labour cost? Wages other benefits = like incentives workers can be paid on piece rate basis or daily wages basis or on performance basis
58. How to pay incentives ? There are 4 types of methods : Differential piece rate Premium bonus schemes Group bonus plans Bonus schemes for indirect workers.
59. What is differential piece rate ? F.D. Taylor was the promotor of this idea : here we use different piece rates for different workers depending on their performance.
60. Example of Taylor's plan Suppose the base rate is 10 per unit. Standard production is 10 per day If a worker is producing upto or more than the standard he will ge t 125% higher rate + 50% bonus payment if 10 units are made = 12.5*10+50% bonus=187.5 if a worker produces 9 units, he gets payment @ 83% rate, so 9 * 8.3 = 74.7 thus there is a difference of 117.5 with just 1 unit of more production.
61. What is Merrick's plan ? If a worker produces less than 83%, he gets normal payment if a worker produces between 83% to 100%, he gets 110% of normal payment if a worker produces more than 100% : he gets 120% of normal payment
62. Example of Merrick Plan : Suppose the base rate is 10 per unit. Standard production is 10 per day and worker A produces 7 units and worker B produces 10 units. A = 7*10 = 70 B = 10*11*120% =132 so worker B gets 62 more by producing just 4 units more.
63. Gantt's plan Give 20% bonus on time saved, and minimum time rate is assured. Higher piece rate may be given on higher production
64. Example of Gantt method A worker is paid Rs. 100 per day for standard production of 100 units. The worker produces 120 units. He gets 100 + 20% bonus = 120 per day.
65. What is Emerson's plan ? 66.66% efficiency = base rate 90% efficiency = base rate + 10% bonus 100% efficiency = base rate + 20% bonus above 100% efficiency = base rate + 20% bonus + 1% for every 1% increase in productivity efficiency = standard time / time taken * 100
66. Example of Emerson's plan A worker has to take 20 hours to do a work. He is paid Rs. 100 per hour. He actually takes 18 hours. How much should be paid ? Efficiency = 20/18*100 = 111% normal payment = 18*100 = 1800 bonus = 20% = 360 additional bonus = 198 total = 2358
67. What is Halsey plan ? Here 50% bonus is given for time saved .
68. Example of Halsey plan A worker has to take 20 hours to do a work. He is paid Rs. 100 per hour. He actually takes 18 hours. How much should be paid ? Solution : time saved = 2 18*100 = 1800 + bonus = (2 * 100 * 50/100) = 100 total payments = 1900 answer
69. What is Rowan plan Here payment for standard time is guaranteed, but if a worker is able to finish it faster, he has a possibility of getting bonus
70. Example of Rowan plan A worker has to take 20 hours to do a work. He is paid Rs. 100 per hour. He actually takes 18 hours. How much should be paid ? Solution : minimum guarantee = 20*100 = 2000 payment as per Rowan plan : 18*100 = 1800 bonus = 2/20*18*100 = 180 total payments = 1980 the worker would get 2000.
71. 2 nd example on Rowan plan A worker has to take 20 hours to do a work. He is paid Rs. 100 per hour. He actually takes 15 hours. How much should be paid ? Solution : minimum guarantee = 20*100 = 2000 payment as per Rowan plan : 15*100 = 1500 bonus = 5/20*15*100 = 375 total payments = 1875 the worker would get Rs. 2000
72. What is Bedaux Plan Here bedaux points are calculated. The worker gets bonus for Bedaux points saved. Thus if a worker is able to save 30 bedaux points, he gets incentives for 30 B points
73. WHAT ARE DIRECT EXPENSES ? costs, other than materials or wages, which are incurred for a specific product or salable service
74. WHAT ARE INDIRECT EXPENSES ? expenses which cannot be directly, conveniently and wholly allocated to cost centres or cost units
75. COST OF PREPARING A MOULD – A DIRECT / INDIRECT ? IT IS A DIRECT EXPENSE
76. RENT OF THE OFFICE ? It is indirect expenses – as it cant be attibuted to any product (the company may be making many products).
77. What are overheads? cost of indirect material, indirect labour and such other expenses, including services, as cannot be conveniently charged direct to specific cost centres or cost units
78. Types of overheads? 1. Function wise classification (manufacturing, administrative and selling overheads) 2. behaviour based classification (fixed, variable and semi-variable). 3. Element based overheads (material, labour and expenses)
79. What is allocation? Allocation of overheads is the process of charging the full amount of overhead costs to a particular cost centre
80. What is absorption ? allotment of proportions of items of cost to cost centers or cost units on some logical basis
81. What is the difference between allocation and absorption of overhead ? Allocation refers to charging overhead to a particular head – because it belongs to that. Absorption = when we take up an equitable basis and try to divide overhead expenses to different departments on that basis, it is called absorption of overhead
82. Example of absorption ? The expenses of maintenance department can be absorbed by different production departments on the basis of amount of investments in plant and machinery (or any other logical basis)
83. What is machine hour rate? overhead cost for operating the machine for one hour
84. What is primary distribution of overhead? When overhead expenses are divided among all the departments, it is called primary distribution. Here distribution is also made to service department. Example : Factory building rent is distributed to 5 departments equally, so Rs. 1000 is distributed to A,B,C,D,E department and each department gets Rs. 200
85. What is secondary distribution of overhead? After primary distribution, the expenses of service department is distributed to production departments. In the previous slide, we have E department which is a service deparment and gets Rs. 200. this amount has to be again distributed between A,B,C,D. So now A,B,C,D get 50 each. This is called secondary distribution.
86. What is standing order number? Standing order number is a code number given to a factory overhead item
87. How to control overheads? There are two possibilities : 1. fix standards regarding fixed and variable expenses 2. fix standards regarding range of activities and accordingly prepare flexible budgets and give executives responsibilities to minimise these
88. What are the ways to make people responsible to reduce overheads? Adopt responsibility accounting, responsibility costing, cost centre approach and other tools of management, which can enable you to control expenses
89. What are selling and distribution overheads? These expenses help us in increasing sales. So they must be carried out but in proper manner. They include expenses on sales promotion, publicity, dealer awareness programmes, sales executive motivation programmes etc. They can be standardised as follows : 1. as % of works cost 2. as % of selling price 3. as fixed rate per unit sold etc.
90. What are administrative costs... Cost of office staff, office maintenance expenses, general administrative expenses like correspondence, etc. They are not directly related to manufacture or sale of a product, but they have to be incurred. Thus they have to be standardised.
91. How to standardise administrative expenses? Administrative overheads can be standardised as follows : as % to Works cost basis as Sales value/quantity basis as % to Gross profit on sales as a fixed rate to Units manufactured as a % of conversion cost etc.
92. Example : fix standard for office overheads Materials Consumed 400 Direct Labour 300 Factory Overheads 240 Office and Administrative Expenses 94 Sales =1240 You have to apply for a project. It is estimated that the project will require materials costing Rs. 300 and direct wages for it will be Rs. 450. What should be the quotation?
93. solution... Prime cost = (material+labour +direct expenses) = (400+300) = 700 add :factory overhead = 240 (34% of prime cost) works cost = 940 administrative overhead = 94 (10% of works cost) cost of production = 1034 sales = 1240 profit = 206 (20% of cost of production)
94. Quotation .... Material = 300 labour 450 prime cost = 750 add factory overhead = 34% =255 works cost = 1005 add : administrative overhead 10% = 100 =1105 add profit 20% = 220 price to quote = 1325 answer
95. Example ... In a certain department of a factory there are two shops. Total departmental overheads for a year are Rs. 1,20,000 and the estimated number of direct labour hour is 24,000 (10 men employed for 48 hours per week during 50 weeks in the year). From the particulars given below calculate the prime cost and works cost of a work order No. 54 which passes through both shops: (1) Material consumed Rs. 1,000. (2) Direct labour hours : Shop A 8 hours @ Rs. 6.00 per hr Shop B 5 hours @ Rs. 7.50 per hr. (3) Works overheads are to be levied by means of a direct hour rate.
96. solution... Overhead rate = 120000/24000 = 5 per hour. Direct cost : Material 1000 labour (8*6 + 5*7.5) = 85.5 prime cost = 1085.5 factory overhead (13*5) = 65 works cost = 1150.5 answer
97. Example ... Vivek & Gautam Ltd. manufactures four sizes of the product `Bikana Model’ called A, B, C, and D in the Department. The workers are paid the piece rate of Re. 1.00, Rs. 1.50, Rs. 2.00, Rs. 3.00 per unit of the product sizes A, B, C and D respectively. Dearness allowance paid to the workers is Rs. 4.00 per day. Miscellaneous payments are 20% of the basic wages. Calculate cost for product size A. Direct Labour (Days) 104 (total days 286) Production (Units) 320 Direct Material (Rs.)250 (total material cost for all units is 625) Overhead Expenses: Indirect Material 500 Indirect Labour 572 Indirect Expenses 429
98. solution... Direct material : =250 Direct labour (320 * 1)+ (104 *4)+(64) =800 other direct expenses = nil prime cost = 1050 / 320 = 3.28 per unit indirect material 500 *250/625 * 1/320 = .62 indirect labour and overhead can be approtioned on the basis of labour days : 1001*104/286 * 1/320 = 1.14 total works cost per unit : (3.28+.62+1.14) = 5.04
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