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Pioneer Inc.

Group Name: PIONEER


Name ID

Jobayer Bin Hasnat 122 0494 030

Tonmoy Michael Rozario 131 1139 630

Sazia Monihar 132 0471 030

Anonya Islam Chowdhury 141 1187 630


Manufacturing Process
Materials used: Colored papers, art papers, glue, paper hardboards,
poster paper, lace and colored stone.
Tools: Needle, bookbinding awl, anti-cutter, scissors, ruler and thread.
Step 1: Cutting and making signatures
Step 2: Cutting hard covers
Step 3: Pierce
Step 4: Sewing.
Step 5: Decorate.
Work Details Calculations Labor Hours No. of
Diaries
Produced
Number of 4
workers
Labor 8
Hours/Day
Maximum Production

Labor 8 hours * 6 48
hour/week Days
Labor 8 hours * 24 192
hours/month Days
Total labor 8 Hours * 24 768
Hours Days * 4
available Labors

No. od 1/4 0.25


Capacity

Diaries
Produced/H
our
Total number 768 Hours* 192
of Diaries 0.25
Produced/M
onth
Details Input/Unit Per Unit cost (TK) Total Cost
2 pieces of paper 1 piece=8.27 * 5 10
boards 5.85
Art paper 4 pieces 20 80
Printed Color 1 piece 20 20
Paper
Poster Paper 1 piece 10 10
Lace 1 piece 30 30
Total Direct 150
Material Cost of 1
unit
Total Direct 28800
Material Cost of
192 units
Direct Labor No. of Labor Hours/Unit Cost/ DLH(Tk) Total
Cost/Unit
Labor 4 4 20 80
Total Direct 15360
Labor Cost

MOH COST(TK)
Rent 5000
Water Bill 300
Electricity Bill 600
Needle 10
Thread 30
Color Stone 20
Glue 30
Ruler 20
Total MOH 6010
Support and Selling cost
Prime and Conversion Cost
Prime Cost=Direct Material Cost + Direct
Labor Cost
=28800+15360
=44160
Conversion Cost = Direct labor cost +
Manufacturing overhead cost
= 15360+6010
=21370
Determination of Full Cost
Variable cost Amount (Tk) Total Amount (Tk)
Direct material 28800
Direct labor 15360
Packaging 200
Telecommunication 350
Thread 30
Color Stone 20
Glue 30
Total Variable Cost 44790
Fixed cost
Rent 5000
Water Bill 300
Electricity Bill 600
Needle 10
Ruler 20
Administrative cost 1000
Distribution cost 1200
Total fixed cost 8130
Total full cost 52920
Amount (Tk) Amount (Tk)
Direct cost
Paper boards (192*10) 1920
Art paper (192*80) 15360
Printed Paper (192*20) 3840
Poster Paper (192*10) 1920
Lace (192*30) 5760
Simple Costing System

Direct material cost 28800


Direct labor 15360
(768hrs*20tk/DLH)
Total direct cost 44160
Indirect cost
Rent 5000
Water Bill 300
Electricity Bill 600
Needle 10
Thread 30
Color Stone 20
Glue 30
Ruler 20
Administrative Cost 1000
Telecommunication 350
Packaging 200
Distribution Cost 1200
Simple Costing System
(Contd.)
Total indirect cost=8760 TK

Total labor hours=768 hrs

Indirect cost rate=8760/768


=11.40 TK per labor hr.
Product Cost Under Simple
Cost
Total unit of production=192 units
Total (Tk) Per unit (Tk)

Direct materials 28800 150

Direct labor 15360 80

Total direct cost 44160 230

Indirect cost allocated 8760 45.63

Total cost 52920 275.63


Cost Allocation of Multiple Support Dept.
Support Departments Operating departments

Administrative Telecommunication Distribution Manufac total


Cost cost turing
cost
Budgeted 1000 350 1200 50170 52720
Cost incurred
before any
inter-
department
allocation

Support Work 20% 40% 40% 100%


supplied by
administration

Support Work 10% 30% 60% 100%


supplied by
Telecommuni
cation
Support Departments Operating departments
Administrati Telecommunicati Distribution Manufacturing Total
ve Cost on cost
cost
Cost 1000 350 1200 50170 52720
incurred
Allocation 500 500
of (1000)
administrati
on(40/80;
40/80)

Allocation (350) 116.67 116.67


of
Telecommu
nication
Cost(30/90;
60/90)

0 0 1816.67 50786.67 52720


Details Taka Total(taka)
Direct Cost
Direct Material(150*192) 28800
Direct Labor(80*192) 15360 44160
Indirect Cost
Activity Based Costing

Rent (11.11*450) 5000


Water Bill(35*4) 300
Electricity Bill(1.33*450) 600
Needle(.055*192) 10
Thread (.156*192) 30
Color Stone(.10*192) 20
Glue(.16*192) 30
Ruler(.10*192) 20
Administrative 1000
Cost(5.21*192)
Telecommunication(1.82 350
*192)
Distribution (6.25*192) 1200
Product Line Profitability
Report under Simple Costing
We assumed that 75% of our total product will be
sold based on market demand.
Revenue 43200
Direct cost

COGS (33120)

Indirect Cost

Thread (30)

Rent (5000)

Water Bill (300)

Electricity Bill (600)

Tele communication (350)

Distribution (1200)

Packaging (200)

Profit 1310
Change of Operating Revenue

Activity based costing:


Profit margin ratio=(1310/43200)*100
=3.03 %
Simple costing:
Profit margin ratio =(285.12/43200)*100
= 0.66 %
ABC results in more precise calculation.

Master Budget
Schedule: 1 Revenue Budget
units Selling price per Total revenues
unit

diary 144 300 43200

Schedule: 2 Production Budget


Diary
Unit to be sold 144
Add: target ending 14
inventory

Total needs 158


Less: beginning inventory 0

Units to be produced 158 units


Schedule 3A : Direct Material Usage Budget
Schedule 3A : Direct Material Usage Budget
Schedule 3B: Material Purchase Budget
Paper Art paper Printed Poster lace Total
board paper paper
s
Physical units
Materials to be 316 632pices 158 158 158
purchased pieces pieces pieces pieces

Add: Target ending 63.2 126.4 31.6 31.6 31.6


inventory
Total needs 379.2 758.4 189.6 189.6 189.6
Less: beginning 0 0 0 0 0
inventory
cost
Paperboards(379.2*10) 3792

Art paper(758.4*80 60672


Printed paper(189.6*20 3792
Poster paper(189.6*10) 1896
Lace(189.6*30) 5688
Total cost of materials 3792 60672 3792 1896 5688 75840
to be purchased
Schedule 4 : Direct Manufacturing Labor Budget
Details Units Hours/Unit Total Hours Wage/Hour Total(tk)

Diary 158 Units 4 632 20 12640

Schedule: 5 Manufacturing Overhead Cost budget


Total

MOH 6010
Total MOH 6010

MOH Rate = (Total Budgeted MOH/Total Labor Hours) = (6010/632)


=9.51 TK/per DLH
MOH Cost = (Total Budgeted MOH/Total Units) = (6010/158)
=38.04 T K/Per Unit
Cost of Diary per Unit

Details Input Cost(tk) /Input Total


Direct Materials
Paper boards 2 Pieces 5 10
Art paper 4 pieces 20 80
Printed Color 1 piece 20 20
Paper

Poster Paper 1 piece 10 10


Lace 1 piece 30 30
Direct Labor 4 hours 20 80
MOH 4 hours 9.51 38.04
Total 268.04
Manufacturing
Cost
Details Units Cost/Unit Total(tk)

Direct Material

paper boards 63.2 5 316

Art paper 126.4 20 2528

Printed Color 31.6 20 632


Paper

Poster Paper 32.6 10 326

Lace 32.6 30 978

Finished goods 14 268.04 3752.56

8532.56
Details Taka Taka

Beginning Finished 0
Goods Inventory

(+) Cost of Good


Manufactured

Direct Material Used 23700

Direct Labor 12640

MOH 6010

Goods Available for sale 42350

(-) Ending Finished 3752.56


Goods Inventory

Cost of Goods Sold 38597.44


)
Per unit cost Total

Sales revenue 300 43200

Less: Variable cost (232.86) (33531.84)

Contribution margin 67.14 9668.16

Fixed cost (57.01) (8210)

(8210/144)

Net income 10.13 1458.16


Break- Even
Break- Even Number of Unit=Fixed Cost/Contribution Margin Per Unit
=8210/67.14
=122.28 units

Break-even Revenue= Fixed Cost/CM%

CM%=CM per unit/Selling Price

=67.14/300

=22.38%

Therefore, Break-even Revenue= 8210/0.2238

=Tk. 36684.53
Margin of Safety
Margin of Safety= Budgeted Revenue-Breakeven Revenue

=43200-36684.53

=Tk.6515.47

MOS%= MOS/Budgeted Revenue

=6515.47/43200

= 15.08%
Degree of Operating Leverage
Degree of Operating Leverage = Contribution
Margin/ Operating Income

= 9668.16/ 1458.16
= 6.63 times

Degree of operating leverage (DOL) measures the


risk return trade in different cost structures. It shows
the effect of fixed cost on operating income due to
sales. Here DOL is 6.63 times means if sales increase
(decrease) by 10% operating income will also
increase (decrease) by 66.3% (10%*6.63).
Key Assumptions
Unit Selling Increase/ Variable Fixed Budgeted Operating
Sold Price Decrease cost per cost per Income
in unit unit
Demand

What If TK Change From


Master
Budget
Scenario 1 144 300 161(12% 232.86 57.01 1641.06 Increased by
(12% Increase) 10.69%
increase in
Demand)
Scenario 2 144 300 121(16% 232.86 57.01 1225.73 decreased
(16% Decrease by 15.93%
decrease )
in Demand

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