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Product : Sandal Application of managerial accounting concepts to product costing
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Product : Sandal
Application of managerial accounting concepts to product costing
William Banarjee 142 0369 030
Nishat Tasnim Anika 123 1053 630
Tanjina Mozumdar 132 0135 030
Mariam Mozumdar 132 0136 03o
Rifat Islam 123 0564 030
Presented By:
INTRODUCTION
Product is sandal
Focusing on this product because of high demand in market
Nature of this business is manufacturing and wholesaling
Produce good quality product at reasonable price and hopefully our
customers will be satisfied with the product.
Competitor Analysis
Targeting to achieve the extra edge
Providing goods at reasonable price
Quality of the product will be an advantage competitors over our
Manufacturing process of the product
Step1: Cutting
Step2: Assembling
Step3; Finishing & Inspection
1 2 3 4 5
Unit produced per hour
No of working hours in a day
No of Working days in a month
No. of labors Total Maximum Production Possible (1*2*3*4)
4 units 8 hours 24 days 5 labors 3840 units
Estimated Costs Cost
Direct Material
Direct Labor
Indirect Material (stitches, adhesives etc.) Depreciation on Machinery
Rent of factory & Utilities
Selling & Packaging Cost
৳518,400.00
৳96,000.00
৳96,000.00
৳ 10,000.00
৳ 35,000.00
৳ 35,000.00
Cost Per Unit No of units Produced
Total Cost
leather 75 BDT 3840 units ৳288,000.00
Plastic Sole 60 BDT 3840 units ৳288,000.00
Total direct cost ৳ 518,400.00
No of Labor allocated
No of hours worked by each labor in a month
Total labor hours
Per hour labor cost
Total
Cutting Labor 2 labors 192 hours 384 hours 100 BDT ৳38,400.00
Assembly Labor
2 labors 192 hours 384 hours 100 BDT ৳38,400.00
Finishing and Inspecting Labor
1 labors 192 hours 192 hours 100 BDT ৳19,200.00
Total labor hours
960 labors Total Labor Cost
৳96,000.00
Product Cost Direct / Indirect Fixed / Variable
Leather
Plastic Sole
Labor (Cutting, Assembling, Finishing) Indirect Materials
Depreciation on Machinery
Rent of Factory & Utility Selling & Packaging Cost
Direct Material
Direct Material
Direct Labor
Indirect Manufacturing Overhead Indirect Manufacturing Overhead Indirect Manufacturing Overhead Indirect Manufacturing Overhead
Variable
Variable
Variable
Variable
Fixed
Fixed
Variable
Variable Costs Total Per unit
Leather ৳ 288,000.00 ৳ 75.00
Plastic Sole ৳ 230,400.00 ৳ 60.00
Manufacturing Labor Cost ৳ 96,000.00 ৳ 25.00
Indirect Material (stitches,
adhesives etc.)
৳ 96,000.00 ৳ 25.01
Selling & Packaging Cost ৳ 35,000.00 ৳ 9.12
Total Variable Cost ৳ 745,400.00 ৳ 194.17
Fixed Costs Total Per unit
Depreciation on Machinery
৳ 10,000.00 ৳ 2.60
Rent of factory & Utilities
৳ 35,000.00 ৳ 9.12
Total ৳ 45,000.00 ৳ 11.72
Total cost Per unit cost
Direct Material ৳ 518,400.00 ৳ 135.00
Direct Labor ৳ 96,000.00 ৳ 25.00
Total Direct Cost ৳ 614,400.00 ৳ 160.00
Total Indirect Cost ৳ 176,000.00
Indirect Cost Allocated to Each Unit**
৳ 45.83
Total Cost ৳ 790,400.00 ৳ 205.83
Total Per unit
Direct Material ৳ 518,400.00 ৳ 135.00
Direct Labor ৳ 96,000.00 ৳ 25.00
Direct Expenses - -
Prime Cost ৳ 614,400.00 ৳ 160.00
Total Per unit
Direct Labor ৳ 96,000.00 ৳ 25.00
Manufacturing Overhead
৳ 176,000.00 ৳ 45.83
Conversion Cost ৳ 272,000.00 ৳ 70.33
Total Per unit
Direct Material ৳ 518,400.00 ৳ 135.00
Direct Labor ৳ 96,000.00 ৳ 25.00
Manufacturing Overhead
৳ 176,000.00 ৳ 45.83
Full Cost ৳ 790,400.00 ৳ 205.83
Activity based costing
Direct material 518400
Direct labor 96000
Indirect cost
Indirect material 96000
Rent and factory utility 35000
Depreciation on machinery 10000
Selling and packaging cost 35000
Indirect Costs TotalBudgetedCost
Cost Driver
Indirect Materials ৳ 96,000.00 Percentage Used
by eachdepartment
Rent of Factory & Utility
৳ 35,000.00 Square Footage area
Depreciation on Machinery
৳ 10,000.00 No of Machine Hours
Selling & Packaging Cost
৳ 35,000.00 Labor Hours
Cutting Assembling Finishing& Inspecting
Total
Square Foot 400 sft
400 sft 200 sft
1000 sft
Percentage Used by each department
10% 70% 20% 100%
Number of Machine Hours 384 hours 384 hours 192 hours 960 hours
Labor Hours 384 hours 384 hours 192 hours 960 hours
Indirect Costs of Activities:
Cutting Assembling Finishing& Inspecting
Total
Indirect Materials
৳ 9,600.00
৳ 67,200.00
৳ 19,200.00
96,000.00
Rent of Factory & Utility ৳ 14,000.00 ৳ 14,000.00 ৳ 7,000.00 35,000.00
Depreciation on Machinery ৳ 4,000.00 ৳ 4,000.00 ৳ 2,000.00 10,000.00
Selling & Packaging Cost ৳ 14,000.00 ৳ 14,000.00 ৳ 70,000.00 35,000.00
Simple costing
Revenue ৳ 1,031,700.00
Less: Total Direct Cost ৳ 614,400.00
Less: Total Indirect Cost ৳ 176,000.00
Net Operating Income ৳ 241,300.00
Activity based costing
Revenue ৳ 1,031,700.00
Less : Total Direct Cost ৳614,400.00
Indirect Materials ৳ 96,000.00
Rent of Factory & Utility ৳ 35,000.00
Depreciation on Machinery ৳10,000.00
Selling & Packaging Cost৳35,000.00
Net Operating Income ৳ 241,300.00
Simple Costing System
Revenue ৳ 1,031,700.00
Less: Total Direct Cost ৳ 614,400.00 Less: Total Indirect Cost ৳ 176,000.00
Net Operating Income ৳ 241,300.00
ABC System
Revenue ৳ 1,031,700.00Less : Total Direct Cost ৳614,400.00Less: Indirect CostsIndirect Materials ৳ 96,000.00
Rent of Factory & Utility ৳ 35,000.00
Depreciation on Machinery ৳10,000.00
Selling & Packaging Cost ৳35,000.00
Net Operating Income ৳ 241,300.00
Operating Income Percentage = ৳ 241,300.00 / ৳ 1,031,700.00
= 23.39 %
December 2015
Budgeted Sales In Units 3490 Units
Demand for Product 3490 Units
Forecast of Sales and Demand
Revenue Budget
Units Selling Price Total
Sandal 3490 Units ৳ 300.00 ৳ 1,047,000.00
৳ 1,047,000.00
Production Budget
Dec-15
Budgeted Sales 3490 Units
Add: Desired Ending Inventory 349 Units
Total Needs 3839 Units
Less: Beginning Inventory 0
Required Production 3839 Units
Direct Material Usage Budget
Physical Units Budget
Direct Material: Leather Plastic Sole
Leather (3839 units * 1,5 square feet)5758.5 square feet
Plastic Sole ( 3839 units * 1 unit) 3839 unitsTotal Quantity of Direct Material to be used 5758.5 s.f. 3839 units
Direct Material: Leather Plastic Sole TotalLeather (5758.5 square feet * 50 BDT ) ৳ 287,925.00
৳287,925.00
Plastic Sole ( 3839 units * 60 BDT)
৳230,340.00
৳230,340.00
Total Direct Material to be used ৳ 287,925.00 ৳230,340.00
৳518,265.00
Cost Budget
Direct Material Purchase Budget
Leather Plastic Sole
Leather (6649 s.f. * 50 BDT per s.f.)
৳332,450.00
Plastic Sole (4415 units * 60 BDT per unit ) ৳ 264,900.00
Purchases
৳332,450.00 ৳ 264,900.00
No of Labor allocated
No of hours worked by each labor in a month
Total labor hours
Per hour labor cost Total
Cutting Labor 2 labors 192 hours 384 hours 100 BDT
৳38,400.00
Assembly Labor 2 labors 192 hours 384 hours 100 BDT
৳38,400.00
Finished Labor 1 labors 192 hours 192 hours 100 BDT
৳19,200.00
Total labor hours 960 hours
Total Labor Cost
৳96,000.00
Direct Manufacturing Labor Costs Budget
Ending Inventory Budget
QuantityCost Per Unit Total
Direct Materials:
Leather 890.5 s.f. ৳ 50.00 ৳ 44,525.00
Plastic Sole 576 units ৳ 60.00 ৳ 34,560.00
Total Ending Direct Material ৳ 79,085.00
Finished Goods:
Sandel 349 Units ৳ 205.83 ৳ 71,834.67 Total Finished Goods Inventory ৳ 71,834.67
Total Ending Inventory ৳ 150,919.67
Cost of Goods Sold Budget
TotalBeginning Finished Good Inventory 0Direct Material Used ৳ 518,265.00 Direct Manufacturing Labor ৳ 96,000.00 Manufacturing Overhead ৳ 176,000.00
Cost of Goods Manufactured ৳ 790,265.00
Cost of Goods Sold available for Sale ৳ 790,265.00
Deduct: Ending Finished Good Inventory ৳ 71,834.67
Cost of Goods Sold ৳ 718,430.33
Budgeted Income Statement
Revenue ৳ 1,047,000.00
Cost of Goods Sold ৳ 718,430.33
Gross Margin ৳ 328,569.67
Operating Costs: Indirect Materials ৳ 96,000.00 Selling & Packaging Cost ৳ 35,000.00 Depreciation on Machinery ৳ 10,000.00 Rent of Factory & Utility ৳ 35,000.00 ৳ 176,000.00
Operating Income ৳ 152,569.67
Traditional Format:
Contribution Margin: TotalRevenue ৳ 1,047,000.00
Less: Variable Costs Indirect Materials ৳ 96,000.00 Cost of Goods Sold ৳ 718,430.33 Selling & Packaging Cost ৳ 35,000.00 Total Variable Cost ৳ 849,430.33
Contribution Margin ৳ 197,569.67Less: Fixed Costs Depreciation on Machinery ৳ 10,000.00 Rent of Factory & Utility ৳ 35,000.00 Total Fixed Cost ৳ 45,000.00
Net Operating Income ৳ 152,569.67
Breakeven Point
1 2 3
Fixed Cost*Contribution Margin per Unit
*Breakeven Point (1/2)
৳45,000.00 ৳ 56.61 per Unit 795 units
Breakeven Revenue
1 2 3
Breakeven Point in unitsSelling Price per Units Breakeven Revenue (1*2)
795 units ৳ 300.00 ৳ 238,500.00
Margin of Safety
1 2 3
Budgeted Revenue Breakeven RevenueMargin of Safety in BDT (1-2)
৳ 1,047,000.00 ৳238,500.00 ৳ 808,500.00
Margin of Safety in Percentage = Margin of Safety in BDT / Budgeted Revenue
= ৳ 808,500.00/ ৳ 1,047,000.00
= 77.22%
Summary of Sensitivity Analysis
Unit SoldSelling Price
Direct Material Cost per Unit
Budgeted Operating Income
Change if Operating income from Master Budget
Master Budget3439 units ৳300.00 ৳135.00 ৳ 152,569.67
Scenario 112% increase in price of Direct Material
3439 units ৳300.00 ৳151.20
৳96,031.67
decreased by 36.52%
Scenario 210% decrease in Budgeted Sales
3141 units ৳300.00 ৳135.00 ৳ 119,704.34
decreased by 21.54%
Scenario 315% increase in Budgeted Sales
4014 units ৳300.00 ৳135.00 ৳ 237,935.00
increased by 55.95%
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