Page 50 - DCOM202_COST_ACCOUNTING_I
P. 50

Cost Accounting – I




                    Notes          The next stage in the process of the unit costing is to find out the cost of the production. The cost
                                   of production is the combination of both the factory cost and administrative overheads.
                                                 Cost production = Factory Cost + Administrative Overheads

                                   Administrative overheads is the indirect expenses incurred during the office administration for
                                   the smooth flow production of finished goods.

                                          Example:

                                   In the example discussed to measure factory cost, if the following data is added

                                                                                                      `
                                   Office Rent                                                       6,000
                                   Office Lighting                                                   1,250
                                   Office Depreciation                                               3,500
                                   Director’s Fees                                                   2,500
                                   Manager’s Salary                                                 10,000
                                   Office Stationery                                                 1,000
                                   Telephone Charges                                                  500
                                   postage and Telegrams Calculate production Cost.                   250
                                   Solution:

                                        production Cost = Factory Cost + Administrative Cost
                                           Factory Cost = ` 5,58,000 (from the previous example)
                                     Administrative Cost = Office Rent + Office Lighting + Office Depreciation + Director’s Fees +
                                                       Manager’s Salary + Office Stationery + Telephone Charges + Postage
                                                       and Telegrams
                                                     = 6,000 + 1,250 + 3,500 + 2,500 + 10,000 + 1,000 + 500 + 250
                                                     = ` 25,000

                                   Hence, production Cost = 5,58,000 + 25,000
                                                     = ` 5,83,000
                                                                      Figure 2.6
                                                                          Cost of production

                                             Administrative Overheads                 Factory Overheads
                                                         Office Rent

                                                        Repairs-office
                                                        Office lighting
                                                      Depreciation-office

                                                        Manager salary
                                                       Telephone charges

                                                      postage and telegram
                                                         Stationery





          44                               LOVELY PROFESSIONAL UNIVERSITY
   45   46   47   48   49   50   51   52   53   54   55