Activity-Based-Costing Last month operating results: A $000 B $000 C $000 Total $000 Sales 250.00 470.00 620.00 1,340.00 Direct costs: Cost of goods sold 200.00 329.00 527.00 1,056.00 Indirect costs: SG &A (20% of DC) 40.00 65.80 105.40 211.20 Operating Profit/(Loss) 10.00 75.20 (12.40) 72.80 Revised Operating profit A $000 B $000 C $000 Total $000 Sales 250.00 470.00 620.00 1,340.00 Direct cost: Cost of good sold 200.00 329.00 527.00 1,056.00 Indirect costs: Shelf space costs 22.50 31.50 36.00 90.00 Handling costs 0 15.00 5.00 20.00 Coupon 3.00 0 12.00 15.00 Shrinkage 1.00 21.00 6.00 28.00 Other indirect costs 11.02 18.14 29.04 58.20 Total costs 237.52 414.64 615.04 1,267.20 Operating profits (Sales-total cost) (250.00-237.52) 12.48 (470.00-414.64) 55.36 (620.00-615.04) 4.96 72.80 1) i/ Discuss the revised operating income of the 3 departments and which statement you should use. ii/ Enumerate 5 conditions which would favour the adoption of ABC.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Activity-Based-Costing
Last month operating results:
|
A $000 |
B $000 |
C $000 |
Total $000 |
|
| Sales | 250.00 | 470.00 | 620.00 | 1,340.00 |
| Direct costs: | ||||
| Cost of goods sold |
200.00 | 329.00 | 527.00 | 1,056.00 |
| Indirect costs: | ||||
| SG &A (20% of DC) | 40.00 | 65.80 | 105.40 | 211.20 |
| Operating |
10.00 | 75.20 | (12.40) | 72.80 |
Revised Operating profit
|
A $000 |
B $000 |
C $000 |
Total $000 |
|
|
Sales |
250.00 |
470.00 |
620.00 |
1,340.00 |
|
Direct cost: |
|
|
|
|
|
Cost of good sold |
200.00 |
329.00 |
527.00 |
1,056.00 |
|
Indirect costs:
|
|
|||
|
Shelf space costs |
22.50 |
31.50 |
36.00 |
90.00 |
|
Handling costs |
0 |
15.00 |
5.00 |
20.00 |
| Coupon | 3.00 |
0 |
12.00 |
15.00 |
|
Shrinkage |
1.00 |
21.00 |
6.00 |
28.00 |
|
Other indirect costs |
11.02 |
18.14 |
29.04 |
58.20 |
|
Total costs |
237.52 |
414.64 |
615.04 |
1,267.20 |
|
Operating profits (Sales-total cost) |
(250.00-237.52) 12.48 |
(470.00-414.64) 55.36 |
(620.00-615.04) 4.96 |
72.80 |
1) i/ Discuss the revised operating income of the 3 departments and which statement you should use.
ii/ Enumerate 5 conditions which would favour the adoption of ABC.
2) Machinery - Project A will require a specialised machinery which cost Rs. 18,000 three years ago. It has a current disposal value of Rs. 8,000 and if used in project A, it is estimated that the disposal value in one year’s time will be Rs. 6,000.
Using relevant costing principles, determine the minimum price at which project A can be sold to the MNC to ensure that Build Ltd who plan to undertake a project A, break-even.
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