Cost and Management Accouting

Cost and Management Accouting

Final Income Statement

Particulars Blue Black Red Purple Total

Sales 75000 60000 13950 1650 150600

Material Cost 25000 20000 4680 550 50230

Direct Labour 10000 8000 1800 200 20000

Total Direct Costs 35000 28000 6480 750 70230

Overheads

Indirect Labour (Working Note 1)

Scheduling Production 3333 3333 2534 800 10000

Physical Changeovers 3042 760 3468 730 8000

Recordkeeping 500 500 500 500 2000

Fringe Benefits (Working Note 2) 6750 5037 3321 892 16000

Computer Systems (Working Note 3)

Scheduling Production 2667 2667 2026 640 8000

Recordkeeping 500 500 500 500 2000

Machinery (Working Note 4) 4000 3200 720 80 8000

Maintenance (Working Note 5) 2000 1600 360 40 4000

Energy (Working Note 6) 1000 800 180 20 2000

Total Costs 58792 46397 20089 4952 130230

Total Income 16208 13603 -6139 -3302 20370

Return On Sales (%) 21.61% 22.67% -44.01% -200.12% 13.53%

Working notes to Final Income Statement

 Indirect Labour has been first allocated to different activities which are Scheduling

Production, Physical Change and Recordkeeping on the basis of the information given in the

case about their allocation. Out of these the first one has then been further apportioned to

each of the products on the basis of the Production runs, Physical changover on the basis of

total setup time and recordkeeping has been apportioned equally. This is because

production runs determine how much indirect labour would have worked on each of the

pens, total set up time is taken so as to take into account the time taken to empty and clean

the vats and recordkeeping has been divided equally because irrespective of production

levels the wages given to labour for maintaining records will be the same.

Indirect Labour (Working Note 1) 20000

Rate