Illustration for Direct Costs, Indirect Costs, Activity (Cost Driver), Cost Objects, Fixed and Variable Costs

8/13/2019 Illustration for Direct Costs, Indirect Costs, Activity (Cost Driver), Cost Objects, Fixed and Variable Costs

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MainProductiondepartment

Belt repairs workshop

Compressedair

department

GeneralManager

Production

TotalProduction

Sales andMarketing

HumanResource

Finance,Accounts,

Corporate &legal

CEO andsecretariat

Total otherthan

production

No. of unitsproduced and

sold

No. of beltsrepaired

Cubic feet (cuft.) of

compressedair produced

Timeallocation

No. of unitssold or Sales

revenue

Number ofhead count

Per rupee ofturnover

Per rupee ofturnover

100,000 72 150,000 Per unit selling price 75 Sales revenue 7,500,000 Time allocation of G.M. Production 70% 25% 5% -100%No. of hrs. per month for GM Production 200Head count 200 10 12 1 223 15 5 15 3 38Compressed air consumed 125,000 25,000 NATURE OF EXPENSES

Raw material consumed 200,000 1,750 8,000 - 209,750 - - - - - Wages 50,000 3,000 25,000 1,200 79,200 5,000 2,000 5,000 1,000 13,000 Power 40,000 25,000 35,000 2,000 102,000 3,000 2,000 2,500 1,500 9,000 Depreciation 35,000 15,000 20,000 5,000 75,000 6,000 5,000 3,500 2,000 16,500 Total Direct costs 325,000 44,750 88,000 8,200 465,950 14,000 9,000 11,000 4,500 38,500

Salaries of management staff - - - 400,000 400,000 500,000 200,000 300,000 800,000 1,800,000

Travel and entertainment - - - 50,000 50,000 100,000 25,000 35,000 250,000 410,000 Advertising and sales promotion - - - - 150,000 - - - 150,000 G.M. Production's cost 320,740 114,550 22,910 458,200- - - Compressed air cost 92,425 18,485 110,910- - - Belts repairs cost 177,785 177,785- -

590,950 133,035 22,910 450,000 450,000 750,000 225,000 335,000 1,050,000 2,360,000 Total costs 915,950 - - - 915,950 764,000 234,000 346,000 1,054,500 2,398,500

Total costs allocated 177,785 110,910 458,200 Total Per unit cost (fixed and variable) 9.1595 2,469 0.7394 4.582Sales commission to sales staff 1.50% - 112,500 - - - 112,500

915,950 876,500 234,000 346,000 1,054,500 2,511,000

Cost object - an entity to which cost isassigned

Activity or cost driver



Direct costs Indirect costs Total costsActivity /cost driver Per unit cost

Production department 325,000 590,950 915,950 No. of units 9.1595 Product cost Period costs

Belts repairs work shop 44,750 133,035 177,785 No. of beltsrepaired

2,469 Direct material 200,000 Salaries and wa

Compressed air department 88,000 22,910 110,910 Cu. Ft of air 0.7394 Direct labour 50,000 Power

G.M. Production 458,200 - 458,200 No. of hours 2,291 Prime cost 250,000 Depreciation

## Sales and Marketing 876,500 - 876,500 No. of units 8.765 Manufacturing over heads Travel and ente

Human Resource 234,000 - 234,000 Per headcount

896.55 Indirect material 9,750 Advertising and

Finance, Accounts, Corporate & legal 346,000 - 346,000 Per rupee ofturnover

5% In direct labour 29,200

CEO and secretariat 1,054,500 - 1,054,500 Per rupee ofturnover

14% Over heads 627,000

3,426,950 746,895 4,173,845 665,950

Less: Costs allocated 746,895- 915,950 3,426,950 Nature of expe

Fixed costs Variable costs Total costs Sales 7,500,000 Raw material c

Production department 355,740 560,210 915,950 Product cost 915,950 Other materialBelts repairs work shop 129,550 48,235 177,785 Gross profit 6,584,050 Salaries and waCompressed air department 42,910 68,000 110,910 SGA 2,511,000 PowerG.M. Production 458,200 - 458,200 Profit before tax 4,073,050 54.3% DepreciationSales and Marketing 764,000 112,500 876,500 - Travel and ente

Human Resource 234,000 - 234,000 Finance, Accounts, Corporate & legal 346,000 - 346,000 CEO and secretariat 1,054,500 - 1,054,500 Assumptions

3,384,900 788,945 4,173,845 1 No opening and closing inventory of raw material, work-in-process and finished gooLess: Costs allocated 459,400- 287,495- 746,895- 2 Costs of indirect functions such as HR, Finance and CEO are not allocated to each ot

2,925,500 501,450 3,426,950 3 Depreciation is on the basis of useful life and not on the basis of unit of output meth

Cost objects

Cost objects



TotalCompany

Fixed Costs Variable costs

261

209,750 209,750 92,200 13,000 79,200

111,000 11,000 100,000 91,500 91,500

504,450 115,500 388,950

2,200,000 2,200,000 - 460,000 460,000 - 150,000 150,000 -

- - - - - - - - -

2,810,000 2,810,000 - 3,314,450 2,925,500 388,950

112,500 - 112,500

3,426,950 2,925,500 501,450



ges 1,925,500

9,000

16,500

rtainment 410,000

sales promotion 150,000

2,511,000

se wise break up of product cost

nsumed 200,000 consumed 9,750 ges 479,200

102,000 75,000

rtainment 50,000

915,950

s er.

od hence a fixed cost.

Documents

Illustration for Direct Costs, Indirect Costs, Activity (Cost Driver), Cost Objects, Fixed and Variable Costs