TEST 1-20 September 2013

Rooms 36/37/135/41/42 business block

Coverage- Introduction to cost accounting

- Material control
-Labour cost control
Learning is not childs play: we cannot learn
without pain (Aristotle)
 Goods Received Note [GRN]
GRN is a document showing description of goods and
quantity received.

All deliveries are inspected against the Purchase

Order to ensure that quantity and quality are correct.

A Goods Received Note is then prepared showing

details of goods transferred to stores
Goods Delivery Note
It is a document created by a seller on receipt of
merchandise which describes each good and details
the quantity of each received.
 Cont.
Classification of cost by behaviour refers to : How a
costs behaves [change or remains the same ] when
activity level [production or service] changes

1. Fixed cost: a cost that remains constant in total even it

the production level changes:
E.g.: Rent of P9 000 / annum, MDs salary of P55
000 /month, ... All these remain the same irrespective
of number of units produced/sold in the given period
2. Variable costs: These are costs that vary or change
with the level of activity.
They are measured per unit.
E.g.: labour rate of P17.00 per unit produced, material
costs of P 150. 00 per dress, phone bill for P 3.25 per
minute.

3. Semi-variable [Mixed]: costs have a component that

is fixed and a component that is variable.
E.g.: Mascom phone contract of P 350 per month plus P
1.00 call per minutes, BPC electric charge of P80 per
month plus electricity wattage at P 0.90 per watt
 Cont
Semi-Fixed costs:
Also known as Stepped-Fixed Costs

These are costs that are essentially fixed in nature, but as

activity level increases they too increase by a given [fixed]
amount.
E.g.: You employ a tailor who can make up to 20 dresses a
month [paid P 3 000 per month]. What would labour
costs be if you had orders for : [a] 21 dresses? [b] 40
dresses ?
 Example: You need a single lecturer per 200,
students paid P 15 000 per month. Labour cost if
198 students, 201 students, 401 students?

7
 Total Cost Graph : Semi-fixed costs

PULA

P 45 000

P 30 000

P 15 000

0 200 students 400 students

8
 Exercise
Indicate whether the following are fixed costs, variable
costs, mixed costs or stepped-costs.

1. P 2 000 monthly wage paid to secretary

2. P 40 per brick paid to a brick-maker
3. Factory rental
4. Salary of P 1 200 plus 10% commission on sales paid to
a salesman
5. Advertising expenses
Cont..
6. Salary and 20 % commission paid to employee
7. Water and other power charges in Botswana
8. Insurance premium of P 50 000 p.a. for assets
less than P 1 million, increasing by P 20 000 p.a.
for multiple of P 1 mil in assets
9.Supervisory Personnel
10. Maintenance of machinery