Page 99 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers
Office Rent 6,000
Office Lighting 1,250
Office Depreciation 3,500
Notes Director's Fees 2,500
Manager's Salary 10,000
Office Stationery 1,000
Telephone Charges 500
Postage and Telegrams 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 5.3

Cost of Production

Administrative Overheads Factory Overheads

Office Rent
Repairs-office

Office lighting

Depreciation-office

Manager salary
Telephone charges

Postage and telegram

Stationery

Immediate next stage to determine in the process of unit costing is the component of cost of
sales. The cost of sales is the blend of both, selling overheads and cost of production.
Whatever, the cost involved in the production process in the factory as well in the administrative
proceedings are clubbed with the selling overheads to determine the cost of sales.

Cost of Sales = Cost of Production + Selling Overheads

Selling overheads are nothing but the indirect expenses incurred by the firm at the moment of
selling products. In brief, whatever the expenses in relevance with the selling and distribution
are known as selling overheads.

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