Page 101 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes
Example: In the example continued, if we add the profit that can be earned to be 48,900.
Calculate the product sales expected.
Solution:
Sales = Cost of Sales + Margin of Profit
= 5,99,750 (from the previous example) + 48,900

= 6,48,650
Under the unit costing, the selling price of the product can be determined through the statement
form.

Example: Calculate the prime cost, factory cost, cost of production cost of sales and
profit form the following particulars:

Direct materials 2,00,000 Office stationery 1,000
Direct wages 50,000 Telephone charges 250
Direct expenses 10,000 Postage and telegrams 500
Wages of foreman 5,000 Salesmen’s’ salaries 2500
Electric power 1,000 Travelling expenses 1,000
Lighting: Factory 3,000 Repairs and renewal plant 7,000
Office 1,000 Office premises 1,000
Storekeeper’s wages 2,000 Carriage outward 750
Oil and water 1,000 Transfer to reserves 1,000
Rent: Factory 10,000 Discount on shares written off 1000
Office 5,000 Advertising 2,500
Depreciation Plant 1,000 Warehouse charges 1000
Office 2,500 Sales 3,79,000
Consumable store 5,000 Income tax 20,000
Managers’ salary 10,000 Dividend 4,000
Directors’ fees 2,500

Solution:
Cost Statement/Cost Sheet
Particulars
Direct Materials 2,00,000
Direct wages 50,000
Direct expenses 10,000
2,60,000
Prime Cost
Factory Overheads:
Wages of foreman 5,000
Electric power 1,000
Lighting : Factory 3,000
Storekeeper’s wages 2,000
Oil and water 1000
Rent: Factory 10,000 Contd...

Depreciation Plant 1000
Consumable store 5,000
LOVELY PROFESSIONAL UNIVERSITY
96 Repairs and Renewal Plant 7,000 35,000
Factory Cost
2,95,000
Administration Overheads:
Rent Office 5,000
Depreciation office 2,500
Managers’ salary 10,000
Directors’ fees 2,500
Office stationery 1,000
Telephone charges 250
Postage and telegrams 500
Office premises 1,000
Lighting: Office 1,000 23,750
Cost of production 3,18,750
Selling and distribution overheads:
Carriage outward 750
Salesmen’s salaries 2500
Travelling expenses 1,000
Advertising 2500
Warehouse charges 1000
7,750
Cost of Sales 3,26,500
Profit 52,500
Sales 3,79,000