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Management and Cost Accounting: Manufacturing Costs and Break Even Point
Answered

1.0   Define what is management accounting and explain the differences between Management accounting and financial accounting.

2.0   Define and explain what is a Break Even Point using a graph.           

3.0 Giant Ltd specializes in manufacturing different models of mountain bikes. Assume that a new model, the Jaguar, has been well accepted. As a result, the entity has established a separate manufacturing facility to produce these bicycles. Giant Ltd produces 1,000 bicycles per month. Monthly manufacturing C and other expenses related to these bicycles are as follows:

1.Rent on manufacturing equipment (lease cost) – RM2,000/month;

2.Insurance on manufacturing building – RM750/month;

3.Raw materials (frames, tyres and others) – RM80/bicycle;

4.Power costs for manufacturing facility – RM1,000/month;

5.Supplies for general office – RM8,000/month;

6.Wages for assembly line workers in manufacturing facility – RM30/bicycle;

7.Depreciation on office equipment – RM650/month;

8.Miscellaneous materials (lubricants, solders and others) – RM1.20/bicycle;

9.Rates and taxes on manufacturing building – RM2,400/year;

10.Manufacturing supervisor’s salary – RM3,000/month;

11.Advertising for bicycles – RM10/bicycle;

12.Sales commissions – RM10/bicycle; and

13.Depreciation on manufacturing building – RM1,500/month.

Required:

(a)Assign these costs to the various categories (see the attached table).

(b)Calculate the total manufacturing costs (production overhead/factory overhead) for the month.

(C)Assign these manufacturing cost (production overhead or factory cost) and period cost (other overhead) to the various categories.

 

Product Costs

 

 

Direct Materials

Direct Labour

Manufacturing Overhead

Period Costs

Prime Costs

Conversion Costs

Rent on equipment

 

 

 

 

 

 

Insurance on manufacturing building

 

 

 

 

 

 

Raw materials

 

 

 

 

 

 

Power cost

 

 

 

 

 

 

Supplies for general office

 

 

 

 

 

 

Wages for assembly line

 

 

 

 

 

 

Depreciation on office equipment

 

 

 

 

 

 

Miscellaneous materials

 

 

 

 

 

 

Rates and taxes on manufacturing building

 

 

 

 

 

 

Supervisor’s salary

 

 

 

 

 

 

Advertising

 

 

 

 

 

 

Sales commissions

 

 

 

 

 

 

Depreciation on factory building

 

 

 

 

 

 

4.0 Wong Ltd manufactures and sells per-hung metal doors. Recently, it decided to start selling pre-hung timber doors as well. An old warehouse that the business presently owns will be used to manufacture the new product. To manufacture and sell these pre-hung timber doors, Wong Ltd identifies the following costs:

1.The material cost (timber) for each door is RM10.00.

2.Labour costs involved in constructing a timber door are RM8.00 per door.

3.Depreciation on new equipment used to make a timber door using the straight-line method is RM25,000.00 per year.

4.Rates and taxes on the old warehouse used to make the timber doors are RM6,000.00 per year.

5.Advertising costs for the pre-hung timber doors total RM2,500.00 per month or RM30,000.00 per year.

6.Sales commissions related to pre-hung timber doors sold are RM4.00 per door.

7.Maintenance salaries for the old warehouse are RM28,000.00.

8.Salary of factory manager in charge of pre-hung timber doors is RM70,000.00.

9.Cost of shipping pre-hung timber doors is RM12.00 per door sold.

Required:

(a)Assign these manufacturing and selling costs to the various categories:

 

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