COST ACCOUNTING

 
COST ACCOUNTING
FINAL PROJECT
Learning Objectives
1. To apply the knowledge acquired in the course to conduct a thorough
analysis of cost information, managerial planning and performance evaluation.
2. To apply the appropriate tools of economic analysis, financial research and cost
information in planning and control.
General Guidelines
1. The project must be completed in groups of 3 members.
2. Only one document per group will be accepted.
3. No late assignments will be accepted.
4. No Plagiarism.
5. This project demands extensive brain-storming. You should discuss this project with
classmates. Your instructor will only provide limited individual help.
6. Report – Complete Analysis (10 points)
a. Must be hand-in digitally only through Aula Virtual.
b. Maximum fifteen (15) pages not including support information.
i. All sections of report properly titled.
c. All calculations must be provided in a separate section and usage of excel
must be hand in digitally.
d. APA style for citations.
e. This project should stand by itself. Use this document as a template to complete
your assignment using Microsoft Word (no handwriting will be accepted). Even
though this will be your template, your report should look like a professional
report and should not be bulleted as this document presents. Points will be taken
off if it is presented like that.
f. Material in color red is only to be used as an example. This information HAS to
change based on your product. If your product needs different Overhead Costs
(for example) you may add them as you deem fit.
g. You may use Excel to complete the tables and/or answers. Just make sure you
copy and paste the tables from Excel to your Word Document with the appropriate
labels. While pasting the tables, make sure that they fit in one page (do not split
between two pages) and font size should be at least 11.
7. Presentation – Present an overview of key issues and final conclusions (5 Points)
a. Dates of presentation will be provided in class.
b. Maximum 10 minutes per presentation (as counted by a clock). After 10 minutes,
the teams will not be able to continue presenting as they will be stopped by the
instructor.
c. One team member selected at random seconds before the presentation will
present everything.
d. It Is required to use clear, concrete presentations and visual aids.
e. Additional 5 minutes of Q & A will be provided; ability to answer will be
evaluated. The team members who did not present will be the ones who answer
all the questions (if there are any).
f. Time management will be evaluated as well.
Assignment Requirements
1. Select a company from the service, manufacturing or merchandising sectors. You may
also use an imaginary company.
2. Choose one specific product from that company for this project. Make sure the product
needs at least three different processes to be produced.
For example, my company is UNIBE’s Premium Chips and the product I chose was a bag
of potato chips. There are three main processes used in the chips’ production.
• Washing and Peeling the Potatoes.
• Slicing and frying the potatoes.
• Seasoning and Packaging the chips.
These chips are sold in 12 oz. bags (1 bag is a unit)
3. Table 1 should list the information on the direct materials. Consider this information to
be your standard.
Table 1: Direct Materials

4. Direct labor information should be listed on Table 2. Consider this information to be
your standard.
Table 2: Direct Labor

5. Annual Overhead information is given in Table 3. Overhead is allocated based on direct
labor hours. Estimated annual direct labor hours are 15,000. Calculate a predetermined
OH rate (round to two decimal places if needed). Use this rate when you need to apply
OH.
Table 3: Yearly Overhead Costs

6. Table 4 gives you the information for the last two months on the actual overhead cost.
Use this information to determine the fixed and variable portions of the cost (you will
need this information for table 5).
Machine hours have been determined as the best cost driver for separating mixed cost
into their fixed and variable portions. It takes approximately 12 minutes machine time or
0.2 machine hours for each bag of chips.
Table 4: Actual Overhead Cost for the last two months

1 12 minutes of machine time per bag of chips (1/5 hour = 1 unit)
7. Table 5 is where you will list all your production cost, separated into their fixed and
variable components:
Table 5: Variable and Fixed Costs

8. Cost-Volume-Profit (CVP) Relationships
a. Selling Price: You sell a bag of chips for USD7.60
b. Breakeven Point: Calculate the breakeven point. Be sure to include the fixed
component of mixed cost into your fixed costs and the variable component in the
variable cost. Show your breakeven in Sales Unit and in Sales Dollars.
c. Profit Planning: Determine the number of units you must sell to make an annual
pre-tax profit using 3 assumptions concerning your net income (profit), both in
sales units and sales dollars.
i. Aggressive Profit (USD150,000)

a. Create a sales budget using the information for earning an average profit for the
year. You will break the budget down into the four quarter for the year (think
about if your product could be a seasonal good or not, as this could change the
layout of your sales for each quarter or leave it fixed for all quarters). Use table 6
to complete the sales budget:
Table 6: Sales Budget

b. Create a production budget for each quarter of the year (keep it in quarters to
keep it simpler). Mention what percentage of the next quarter’s sale you want to
come from ending inventory of the previous quarter. Use table 7 to complete this
information:
Table 7: Production Budget

10. Weighted Average Process Costing. Table 8 presents the information for the packaging
department. Complete the questions under table 8:
Direct materials are added 70% at the beginning of the process and the remaining 30%
are added when the chips are 50% complete with the packaging process. Direct labor and
overhead are added evenly throughout the process at the completion rate of the chips.
Table 8: Unit and Cost Information

Added during Quarter 1:
• Direct Materials: USD7,962.
• Direct Labor: 1,600 hours @ USD12.00 per hour.
• Overhead is applied based on predetermined OH rates and actual DL hours
a. Determine the number of units completed during quarter 1.
b. Compute the equivalent units using the weighted average method.
c. Compute the cost per equivalent unit using the weighted average method.
d. Compute the cost of goods transferred to finished good inventory.
e. Computed the ending balance in WIP packaging.
11. Afterwards, imagine actuals for quarter 1 are in and your product sold 30% more units
than what was budgeted, but the selling price was 15% less than previously conceived.
Calculate revenue and compute cost of goods sold (total and per unit) before adjusting
for actual OH cost.
Tables 9 and 10: Actual Results

12. Actual direct material for the main material usage for quarter one was 10% higher but at
a price 5% lower than expected. Calculate the direct materials variances for the direct
materials (price, usage, total) and indicate if these variances are favorable or unfavorable.
Table 11: Direct Materials Variances for Main Material

13. Actual direct labor hours for the quarter were 200 more than what was expected at the
same rate. Calculate the direct labor variances (rate, efficiency and total) and indicate if
these variances are favorable or not.
Table 12: Direct Labor Variances

14. For the next quarter you have been asked to supply a special order of your product from
a non-profit organization. The client wants a custom package that will increase the cost
of packaging by 3%. They requested 10,000 units of your product. Based on your
projections, you have the capacity for this order. What is the minimum price per unit and
total price you would be willing to accept on this order? (You can’t afford to take this offer
at a loss, but you are fine accepting it at breakeven point). Use your standard costs
information.
15. Determine over or under applied overhead and cost of good sold. Actual OH costs are
given below (look at information #13 for actual DL hours used to apply OH). Determine
the new cost of goods sold.
Table 13: Actual OH Cost for Quarter 1

• Amount of applied OH.
• Amount of actual OH.
• Under or over applied amount.
• New COGS amount.