COST ACCOUNTING

Cost Accounting



Cost Accounting

Part A

Prepare and print the following six (6) budgets by month for April, May and June of 2012 and the totals for these three months:

Revenue budget

Months

Steel Gazebo

 

Aluminum Gazebo

 

Projected Sales

Selling Price

 

Projected Sales

Selling Price

Jan-Apr

2 500 per month

$250 each

 

3000 per month

$370 each

May to Aug

2 000 per month

$230 each

 

2 400 per month

$350 each

Sep to Dec

2 400 per month

$ 260 each

 

2600 per month

380 each

 

 

 

 

 

 

 

formulae

April

May

 

June

Total

Steel Gazebo

price * units sales for month

625000

460000

 

460000

1545000

Aluminum Gazebo

price * units sales for month

1110000

840000

 

840000

2790000

Production budget in units

 

formulae

April

May

 

June

Total

Steel Gazebo

100% of following month unit sales + 20% of next month unit sales

2400

2400

 

2400

7200

Aluminum Gazebo

100% of following month unit sales + 20% of next month unit sales

2880

2880

 

2880

8640

Direct material usage budget (both units to be used and the cost budget in dollars)

Direct-Cost Inputs

Steel Gazebo

Aluminum Gazebo

For frames

12 metres of steel

14 meters of aluminum

Fabric Polyster for sails

4 meters

5 meters

LED lights

0

4 lights

 

 

 

 

 

 

 

 

 

Steel

Aluminum

Polyster

LED lights

Steel Gazebo frame

28800

40320

9600

0

Aluminum Gazebo

-

 

14400

11520

Direct material purchases budget in units and in dollars

 

Actual for 2011

 

Estimated for 2012

 

 

 

Steel frame

$1.60 per metre

$1.80 per metre

 

 

 

Aluminum frame

$2 per metre

$2.40 per metre

 

$8 per metre

 

Fabric

$9 per metre

 

 

 

LED lights

$4 each

$3each

Direct manufacturing labour hours and cost budget

Steel

Aluminum

Polyster

LED ligths

Steel Gazebo frame

4320

-

21600

0

Aluminum Gazebo

-

6912

25920

8640

Direct-Cost Inputs

Steel Gazebo

Aluminum Gazebo

Direct Manufacturing Labor

6 hours

8 hours

Total hours (April, May , June)

14400

23040

Manufacturing overhead budget (you are not required to calculate the totals for the three months, only the individual months)

April

May

June

Steel Gazebo

$42,000

$43,680

$43,680

Aluminum Gazebo

$50,400

$52,416

$52,416

Steel

Aluminum

Polyster

LED ligths

Steel Gazebo frame

28800

40320

9600

0

Aluminum Gazebo

-

14400

11520

Cost of Goods Sold

Steel Gazebo

Aluminum Gazebo

Opening Inventory

24500

69050

Production

1120000

2250200

Ending Inventory

55400

61500

Part B: Advice to CEO

Sunny Shades Ltd's plant has a capacity to manufacture 7 200 gazebos per month (3 200 Steel gazebos and 4 000 Aluminum gazebos). The constraint is the direct manufacturing labour hours. The company received an order from an overseas customer to manufacture 10 000 Aluminum gazebos, to be delivered 1 July 2011. The gazebos can be manufactured any month from January to June 2011. To meet the requirements of the overseas customer, the Aluminum gazebos will have to be customised to make the fabric for the sail waterproof. Sunny Shades Ltd does not have the equipment to make the fabric waterproof. They could buy equipment for $30 000 to make the fabric waterproof and do it themselves or they can outsource the waterproofing to be done by another company, which will cost $25 per gazebo. The customer is prepared to pay $350 per gazebo.

The marginal cost is not a cost but an estimated cost. It calculates whether the production of an additional unit is profitable for the company. Two situations may arise: the production of an additional set does not change the cost structure, that is, the marginal cost of a unit remains same as the unit variable cost, and; additional production requires an additional cost, that is, marginal cost of a unit is the sum of unit variable cost and fixed costs. Indeed, in the health industry, we can launch an additional set rather than additional unit (Antos & Rainey 1990). We will see that the difference between theory and ...