Debco limited is a leading manufacturer of tables in the area. The following information was extracted from the books for the current period which 800 tables were produced, Prepare a manufacturing account for Debco limited for the period ending May 31,201. Also calculate the production cost per unit of tables and the total cost per unit to produce tables. Work in progress inventory, beginning of year $32,400 Raw materials inventory, beginning of year $42,000 Finished goods inventory, beginning of year $90,000 Sale $1376400 Indirect labour $80,000 Sale commission expense $165,168 raw materials purchased (net) $441,600 carriage on raw materials $5,000 rent of plant $20640 advertising expense $30,000 factory supplies used $41,400 Depreciation - Office equipment $59,400 Direct labour $236,400 Plant utilities- electricity and water rates $16,440 administrative office salaries $188,640 insurance on plant $10920
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Debco limited is a leading manufacturer of tables in the area. The following information was extracted from the books for the current period which 800 tables were produced,
Prepare a manufacturing account for Debco limited for the period ending May 31,201. Also calculate the production cost per unit of tables and the total cost per unit to produce tables.
Work in progress inventory, beginning of year $32,400
Raw materials inventory, beginning of year $42,000
Finished goods inventory, beginning of year $90,000
Sale $1376400
Indirect labour $80,000
Sale commission expense $165,168
raw materials purchased (net) $441,600
carriage on raw materials $5,000
rent of plant $20640
advertising expense $30,000
factory supplies used $41,400
Direct labour $236,400
Plant utilities- electricity and water rates $16,440
administrative office salaries $188,640
insurance on plant $10920
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
