Page 62 - DCOM206_COST_ACCOUNTING_II

Unit 3: Absorption Costing and Marginal Costing

Uniform Cost Notes
Cost per patrolman supplied by the Lakewood Department of Public Safety, Lakewood,
Colorado.

Summer Uniform Cost for One Mounted Patrolman
Boots at $50 x 2 = $ 100
Spurs at $15 x 1 = 15
Pads at $65 x 3 = 195
Gun, Belt, Holster, etc. at $60 x 1= 60
Lightweight Jacket at $45 x 1 = 45
Total $ 415

Winter Uniform Cost for One Mounted Patrolman
Felt Hat at $25 x 1 = $ 25
Down Coat at $100 x 1 = 100
Rain Slicker at $30 x 1 = 30
Total $ 155

Total Summer and Winter Uniform Expense $570
Street Cleaning Operation

Present street cleaning operations span a five-night, Sunday-to-Thursday-night work week.
To accommodate a horse patrol active six days a week, street cleaning operations should
be shifted to encompass a Monday-to-Friday night work week, and an additional four-
hour Saturday night work shift should be added. Cost figures below represent additional
time-and-a-half wage cost, including fringes, for a 48-hour work week.
Equipment Operator (2) $ 2 005
Labourer (Grade 112) 1 733
Equipment Operator (3) (Sweeper) 2 173
1/2 Equipment Operator (3) (Flusher-six months a year) 1 086
Supervisor (Grade 24) 2 408
Total $ 9 405

Questions:
1. Study and analyze the case.

2. Write down the case facts.
3. What do you infer from it?
Source: http://home.xnet.com/~jkelley/Publications/Costing.fldr/Cost.PDF.Files/09Cost_Case_
Studies.pdf
3.4 Summary

 Marginal Costing is not a method of costing like job, batch or contract costing.
 In fact, this technique is based on the fundamental principle that the total costs can be
divided into fixed and variable. While the total fixed costs remain constant at all levels of
production, the variable costs go on changing with the production level.

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