Management and Cost Accounting: Manufacturing Costs and Break Even Point

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.

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: