Case Study

Cost accounting is a method or approach to find out the total costs that are associated with conducting any business. It enables the manager to evaluate and determine the total cost associated with the final output either product or service. (reference taken from the class lecture)

Breedon Securities opened a new subsidiary for which the set target is $210000.

Company produces two products RC1 and RC2 wherein RC1 was more popular and had projected sales of 100000 units per annum whereas for RC2 projected sales is 60000 units per annum

On basis of the sales projection the managers decided to produce 10000 RC1 and 5000 RC2 per month which made them make $20000 of profit per month. And produce the most optimum mix of quantity produced considering the certain facts remaining the same.

a. Minimum profit of $210000

b. Mix of the product to remain as 2:1

c. Parts, direct labor and supplies could be considered variable.

d. Other costs would be fixed.

The mix decided by them is the most optimum combination.

Sales Revenue | RC1 | RC2 | Total |   |

Produce and sale per month | 10000 | 5000 | 15000 |   |

Projecte selling price | 20 | 23 |   |   |

Sales Revenue | 200000 | 115000 | 315000 |   |

  |   |   |   |   |

Manufacturing Cost |   |   |   |   |

Parts | 55000 | 32000 | 87000 | variable |

Direct labor | 35000 | 21000 | 56000 | variable |

Overhead (a) | 70000 | 42000 | 112000 |   |

  | 160000 | 95000 | 255000 |   |

Manufacturing Cost per unit | 16 | 19 |   |   |

Selling and adminisrative |   |   | 40000 |   |

Total Expense |   |   | 295000 |   |

Profit before tax |   |   | 20000 |   |

  |   |   |   |   |

Manufacturing overhead: |   |   |   |   |

Supplies | 21000 |   |   | variable |

Occupancy (utilities, rent, maintenance) | 15000 |   |   |   |

Equipmet maintenance | 17000 |   |   |   |

Equipment Depreciation | 8000 |   |   |   |

Quality Control and production engineering | 15000 |   |   |   |

Manufacturing...