Break Even analysis:

1. Break-even point in unit sales and in revenue:

2. Break-Even Sales (in taka) = Fixed Cost Cost of margin ratio

3. Margin of safety =Total budgeted sales-Break-even sales.

4.Operating Leverage (OL)

MOH: We will have several MOH costs. They are: Factory rent: Our monthly factory rent will be approximately 15000 BDT, which is a fixed cost. Factory electricity: Monthly 346 Kilo-watt electricity will be used. Per kilo-watt costs 8.67 BDT.SO, factory electricity cost will be (346*8.67) = 3000 BDT, which is a variable cost. Production supervisor salary: One factory supervisor will cost 10000 BDT per month, which is indirect labor and fixed cost. Depreciation of production equipment: We will have fixed assets such as drill machine and electric jig saw machine, one fan, light etc, which will cost approximately 8400 BDT total. This asset has about ten years of useful life. So, the monthly depreciation of production equipment will be around (8400/120) = 70 BDT as we are following a straight line method of depreciation without any salvage value, which is a fixed cost. Packaging: Packaging of each product costs 5 BDT. So, the maximum packaging cost per month will be (1248-5) = 6240 BDT, which is an indirect material and variable cost. NON-Manufacturing costs Selling and administrating cost: Showroom Rent: showroom rent is 25000 BDT per month, which is a fixed cost. Sales-man salary: Salesperson's salary will be 7000 BDT per month, which is a fixed cost. Showroom Electricity bill: Approximately 461.37 kilo-watt electricity will be used in our showroom every month, which will cost (461.37*8.67) = 4000 BDT while per kilo-watt costs 8.67 BDT, which is a variable cost Outlet manager salary: Outlet manager salary will be 10000 BDT per month, which is a fixed cost. Support cost: Transportation cost: Monthly 2000 BDT transporting cost (contract basis) will occur, which is a fixed cost. Depreciation of showroom equipment: In our showroom, approximately 50000 BDT worth fixed assets will be used, such as AC, water filter, led lights etc, which will have ten years of useful life. So, depreciation of showroom equipment will be (54000/120) = 450 BDT per month, which is a fixed cost. Analysis of cost: Fixed cost: nem Total IT Depreciation Tk Tk Tk Tk Indirect labor Factory Electricity Factory rent Shop rent Shop Electricity Marketing and Advertisemer shop keeper salary Tk TK = Tk Tk Total Tk Variable cost: prem TOCATT Direct Labor Tk TK Tk Tk TK Direct Materials Transportation (Factory) Factory electricity Shop Electricity Transportation (Supportive Department) other Factory utility Telephone bill indirect Materials Total Tk TK TK TK TK Mixed cost: TEM TOCK Tk Factory electricity shop Electricity Total TK TK Under a simple costing system, we select direct labor hours as our allocation base. We are estimating these costs for one month, and we are finding the unit product cost of our product. The direct labor hour of one unit product is 0.3333 hour. And labor wage per hour 34 BDT. Total MOH cost for the month is 34310 BDT, and the total labor hour is 416 hours. Direct Material Cost per unit= Wood board + Rope +Hook Screw = 240+20+2 = 262 BDT Direct labor cost per unit = DLH per unit * Wage rate = 0.3333-34 = 11.3322 BDT POHR = Total MOH of the upcoming month / Total allocation base of upcoming month = 34310/416 = 82.476 MOH applied (one unit= POHR* Actual activity of Allocation base of one unit = 82.476* 0.3333 = 27.49 BDT Total cost of one unit = DM + DL + MOH (of one unit) = 262+11.3322+27,49 = 300.821 BDT So, under job order costing total cost of one wooden hang shelf is 300.821 BDT. We will determine the prime, conversion, and the full cost of our product. Our direct material cost is 262 BDT for one unit. The direct labor cost is 11.3322 BDT for one unit. And MOH cost is 27.4892 BDT for one unit. The maximum production of a month is 1248 units. Prime Cost = DM + DL = 262 +11.3322 -273.3322 BDT per unit. And monthly maximum prime cost, (273.3322*1248) = 341118.5856 BDT. Conversion Cost = DL + MOH = 11.3322 + 27,4892 = 38.82144 BDT per unit. And monthly maximum conversion cost, (38.82144*1248) = 48449.15 BDT. Full Cost = DL +DM+ MOH - 262+11.3322-27.4892 = 300.821 BDT per unit. And monthly maximum full cost, (300.821*1248) = 375425 2 BDT. Prime cost: (TOTAL) Prime cost = Direct Material + Direct Lab Conversion Cost: (Total) Conversion cost = Direct Labor + Manufacturing overhead Full Cost: (Total) Full cost Variable cost + Fixed cost Pricing strategy Initial Investment Investea capital TOLTUK Cash Tk Advance Factory Rent TK Advance Shop Rent TK Computer Tk Furniture Tk Banners and Leaflet TK Total Tk Target operating income = Invested capital rate of return on invested capital Selling price Cost base (full cost) + Markup Total Total cost Tk Number of unit Cost per unit (Tk/1248unit) 1248unit Tk = Detail Totar Operating profit Tk Number of unit 1248unit Markup (Tk/1248unit) Tk Detal Tokar TK Markup Cost per unit Markup (TK22.5/TK77.5) Tk % Budget: The Budgeted unit sales has been determined as 1248units. We assumed that the targeted ending inventory would be 10% of the unit budgeted sales with no Beginning Inventory Torar ending Tentory 1248 70% TZ UNTES Total Budgeted Sales unit (1248 -(1248 -10%)) - 1123 Units Sales Budget Decan Tumoerorum Price per un TULED Wooden Hang Shelf 1123 Tk450 TI 505350 Production Budget Decall TOCO Sales requirement 1123 unit (+) Target Ending Finished Goods Total needs of finished goods |(-) Beginning Finished Goods 125unit 1248 unit O unit Units need to production 1248unit = Direct Material Usage Budget Detall um Total Wood board (1248 unit* 1pc) 1248unit Rope 1248 unit*1pc) 1248unit Hook Screw( 1248 unit *1pc) 124 Bunit Total Direct materials need to production 1248unit Cost: Wood board (1248 unit *TK240) Tk299520 Ropel 1248 unitTK20) Hook Screw 1248 unit*TK2) TK24960 TK2496 Total Tk326976 Direct material purchase Budget Deta Tianlogon wou TOCI 1248unit 125unit Ounit Production needed (+) Targeted Ending Inventory(DM) -) Beginning Inventory(DM) Actual requirement Cost : Wood board (1373 unit *TK240) Rope( 1373 unit *TK20) Hook Screw 1373 unit*TK2) 1373unit Tk329520 TK27460 TK2746 Total Tk359726 Direct manufacturing labor budget PTOGUCE UTE DOH TOC US Wages TOCHT per unit Rate DL cost 1248 0.33 416 34 Tk14144 Wooden Hang Shelf Total direct manufacturing labor budget Tk14144 Manufacturing Overhead Cost Budget Variable OH Packaging (1248unityks) TOCK Tk6240 Transportation Tk 2000 Fixed MOH Tk15,000 Tk70 Factory rent Depreciation Supervising labors Mixed MOH Tk10000 Factory electricity Tk4000 Tk78292 Total Budgeted MOH Rate = Total Budgeted MOH cost / Cost base [Here, cost base is direct labor hour] Tk34310/416hrs =Tk82.476 per direct labor hour MOH per Unit=MOH per direct labor hour/ unit to be produce in per direct labor hour = Tk82.476/3unit per labor hour - TK27.49 per unit Manufacturing Budget pecat Tnput per unit or Cost per un OT TOLICOS output input Direct Material Wood board lunit Tk240 TK 240 Rope 1unit TK20 TK 20 Hook Screw Direct Labor | MOH Manufacturing cost per Wooden Hang Shelf 1unit 0.33 DLHS 0.33 DLHS TKC2 Tk34 per DLH Tk82.476 Per DLH TKC2 Tk11.3322 TK27.49 Tk300.82 Ending Inventory Budget Detall Cost per un Tota COSE 125 unit Tk300.82 Tk37602.77 Ending finished goods Ending inventory budget Tk37602.77 Total Total 0 Cost of Goods sold Budget Decan Beginning finished goods |(+) Cost of goods manufactured Direct Material Direct Labors Manufacturing Overhead Total goods available for sale (-) Ending inventory Cost of goods sold Tk156000 Tk13000 Tk78292 Tk247292 Tk24730 Tk222562 Budgeted Income Statement Decan DDV BUT Tk505350 Tk355991 Tk149359 Sales Revenues (1123unit*Tk450) ||- Cost of goods sold Gross Profit - Operating Expenses Supportive Cost Selling Cost Total operating cost Net Operating Income Tk2450 Tk46000 Tk48450 Tk149359 Budgeted Contribution Format Income Statement Detan Total TISO5350 Tk Sales Revenues (1123unit*Tk450) Variable cost (1123unit* (TK/1248unit)} Contribution margin Fixed cost Net Operating profit TK TK Tk Estimations Manufacturing Process: Wooden hang shelf will be manufactured from SFT 4FT sized partex board. These boards will be cut into a 3FT 1FT ratio, which will be the direct raw material for our product. Then our labor will drill four holes at four corners of these 3F+* 1FT board. Then they will fasten the ropes as the picture is shown. And with a hook screw from where the wooden board will be hung, our product is finished and ready to display We can make three products in 1 hour. So, to produce one unit, we need (20/60) = 0.3333 hours. Two labors will work in our factory. Each worker will work 8 hours a day and 26 days of the month. In total, they will work (8*26*2) = 416 hours a month. So, in a month, we can produce (416/0.3333) = 1248 products. So, 1248 products is our maximum production We are estimating all costs for our product. Our cost object is our product, which is a wooden hang shelf. It is the only product we are working with. So, every cost here is direct cost except packaging cost and Production supervisor salary. Manufacturing Costs: To make the actual product, we have some costs, such as direct material, direct labor, and manufacturing overhead. Together they are known as manufacturing costs. Direct Material: Wood board: One SFT 4FT sized partex board approximately costs 2400 BDT. Our product will be 3Ft* 1FT ratio. So, from 1 partex board, we can make ten products. So, one product costs (2400/10) = 240 BDT worth of partex board, which is a variable cost. Rope: We will use nylon rope. One kg of nylon rope costs 200 BDT. To make one product, we need approximately 100 grams of rope. From one kg of rope, we can make ten products. Per gram rope will cost (200/1000) = 0.2 BDT. So, one product costs (100*0.2) = 20 BDT worth of nylon rope, which is a variable cost. Hook Screw: One product needs one hook screw. One good hook screw will cost 2 BDT each, which is a variable cost (These costs are estimated from sindabad.com, and material links are given in the reference.) Direct Labor: Two labors will work in our factory. One of them will cut and polish the board into pieces, and another worker will be drilling, fastening the rope, and screwing. So, the monthly labor wage will be approximately 14144 BDT. Per labor hour costs (141441416) = 34 BDT, which is a fixed cost. MOH: We will have several MOH costs. They are: Factory rent: Our monthly factory rent will be approximately 15000 BDT, which is a fixed cost. Factory electricity: Monthly 346 Kilo-watt electricity will be used. Per kilo-watt costs 8.67 BDT.SO, factory electricity cost will be (346*8.67) = 3000 BDT, which is a variable cost. Production supervisor salary: One factory supervisor will cost 10000 BDT per month, which is indirect labor and fixed cost. Depreciation of production equipment: We will have fixed assets such as drill machine and electric jig saw machine, one fan, light etc, which will cost approximately 8400 BDT total. This asset has about ten years of useful life. So, the monthly depreciation of production equipment will be around (8400/120) = 70 BDT as we are following a straight line method of depreciation without any salvage value, which is a fixed cost. Packaging: Packaging of each product costs 5 BDT. So, the maximum packaging cost per month will be (1248-5) = 6240 BDT, which is an indirect material and variable cost. NON-Manufacturing costs Selling and administrating cost: Showroom Rent: showroom rent is 25000 BDT per month, which is a fixed cost. Sales-man salary: Salesperson's salary will be 7000 BDT per month, which is a fixed cost. Showroom Electricity bill: Approximately 461.37 kilo-watt electricity will be used in our showroom every month, which will cost (461.37*8.67) = 4000 BDT while per kilo-watt costs 8.67 BDT, which is a variable cost Outlet manager salary: Outlet manager salary will be 10000 BDT per month, which is a fixed cost. Support cost: Transportation cost: Monthly 2000 BDT transporting cost (contract basis) will occur, which is a fixed cost. Depreciation of showroom equipment: In our showroom, approximately 50000 BDT worth fixed assets will be used, such as AC, water filter, led lights etc, which will have ten years of useful life. So, depreciation of showroom equipment will be (54000/120) = 450 BDT per month, which is a fixed cost. Analysis of cost: Fixed cost: nem Total IT Depreciation Tk Tk Tk Tk Indirect labor Factory Electricity Factory rent Shop rent Shop Electricity Marketing and Advertisemer shop keeper salary Tk TK = Tk Tk Total Tk Variable cost: prem TOCATT Direct Labor Tk TK Tk Tk TK Direct Materials Transportation (Factory) Factory electricity Shop Electricity Transportation (Supportive Department) other Factory utility Telephone bill indirect Materials Total Tk TK TK TK TK Mixed cost: TEM TOCK Tk Factory electricity shop Electricity Total TK TK Under a simple costing system, we select direct labor hours as our allocation base. We are estimating these costs for one month, and we are finding the unit product cost of our product. The direct labor hour of one unit product is 0.3333 hour. And labor wage per hour 34 BDT. Total MOH cost for the month is 34310 BDT, and the total labor hour is 416 hours. Direct Material Cost per unit= Wood board + Rope +Hook Screw = 240+20+2 = 262 BDT Direct labor cost per unit = DLH per unit * Wage rate = 0.3333-34 = 11.3322 BDT POHR = Total MOH of the upcoming month / Total allocation base of upcoming month = 34310/416 = 82.476 MOH applied (one unit= POHR* Actual activity of Allocation base of one unit = 82.476* 0.3333 = 27.49 BDT Total cost of one unit = DM + DL + MOH (of one unit) = 262+11.3322+27,49 = 300.821 BDT So, under job order costing total cost of one wooden hang shelf is 300.821 BDT. We will determine the prime, conversion, and the full cost of our product. Our direct material cost is 262 BDT for one unit. The direct labor cost is 11.3322 BDT for one unit. And MOH cost is 27.4892 BDT for one unit. The maximum production of a month is 1248 units. Prime Cost = DM + DL = 262 +11.3322 -273.3322 BDT per unit. And monthly maximum prime cost, (273.3322*1248) = 341118.5856 BDT. Conversion Cost = DL + MOH = 11.3322 + 27,4892 = 38.82144 BDT per unit. And monthly maximum conversion cost, (38.82144*1248) = 48449.15 BDT. Full Cost = DL +DM+ MOH - 262+11.3322-27.4892 = 300.821 BDT per unit. And monthly maximum full cost, (300.821*1248) = 375425 2 BDT. Prime cost: (TOTAL) Prime cost = Direct Material + Direct Lab Conversion Cost: (Total) Conversion cost = Direct Labor + Manufacturing overhead Full Cost: (Total) Full cost Variable cost + Fixed cost Activities and selecting cost drivers based on the cause and effect relationship Activities Cost drivers Activity Rate Cost Consumption Total of cost drivers 1248 units 326976 Direct material Number of units produce 262 Direct labor Number of labor hours 416 Hirs. 14976 36 Factory Rent Square feet 600sft. 15000 25 Utility KW use 346 Kw 3000 8.67 Supervision/Shop keeping Total time spent 720 Hrs. 10000 13.89 Depreciation Per product 120 8400 70 BDT Packaging No. of unit sales 1248 6240 5 Salesperson salary Total time spent 720 Hirs. 7000 9.72 Showroom electricity Per kW 461.37 kw 4000 8.67 bill Unit production cost under ABC Casting Direct Material F1248262 1326976 Direct labor |-416 36 14976 Factory Rent P2.5'600 15000 Utility 5346 8.67 3000 Supervision/shop keeping 7720 33.89 10000 Depreciation F12070 13400 Packaging P124895 3240 Salesperson salary P720 9.72 7000 Showroom electricity 461373.67 4000 otal cost cost per unit 1248 units 317tk. per unit (Approx) = Product line profitability report: Simple costing: pecan TO Tota TTK Direct Material per unit Tk262 Direct Labor per unit Tk11.3322 Tk27.49 MOH per unit Product cost per unit Tk300.82 Tk561600 TK375423 TK186177 Revenue (Tk450*1248) Less: Cost of goods sold (Tk300.82*1248unit) Gross profit Less: Operating expense Net Income Net Income ratio Tk TK % Activity base costing: pecan Toca y Revenue Tk Less: Total cost (Tk 1248unit) Tk Net Income Tk = Net Income ratio % Pricing strategy Initial Investment Investea capital TOLTUK Cash Tk Advance Factory Rent TK Advance Shop Rent TK Computer Tk Furniture Tk Banners and Leaflet TK Total Tk Target operating income = Invested capital rate of return on invested capital Selling price Cost base (full cost) + Markup Total Total cost Tk Number of unit Cost per unit (Tk/1248unit) 1248unit Tk = Detail Totar Operating profit Tk Number of unit 1248unit Markup (Tk/1248unit) Tk Detal Tokar TK Markup Cost per unit Markup (TK22.5/TK77.5) Tk % Budget: The Budgeted unit sales has been determined as 1248units. We assumed that the targeted ending inventory would be 10% of the unit budgeted sales with no Beginning Inventory Torar ending Tentory 1248 70% TZ UNTES Total Budgeted Sales unit (1248 -(1248 -10%)) - 1123 Units Sales Budget Decan Tumoerorum Price per un TULED Wooden Hang Shelf 1123 Tk450 TI 505350 Production Budget Decall TOCO Sales requirement 1123 unit (+) Target Ending Finished Goods Total needs of finished goods |(-) Beginning Finished Goods 125unit 1248 unit O unit Units need to production 1248unit = Direct Material Usage Budget Detall um Total Wood board (1248 unit* 1pc) 1248unit Rope 1248 unit*1pc) 1248unit Hook Screw( 1248 unit *1pc) 124 Bunit Total Direct materials need to production 1248unit Cost: Wood board (1248 unit *TK240) Tk299520 Ropel 1248 unitTK20) Hook Screw 1248 unit*TK2) TK24960 TK2496 Total Tk326976 Direct material purchase Budget Deta Tianlogon wou TOCI 1248unit 125unit Ounit Production needed (+) Targeted Ending Inventory(DM) -) Beginning Inventory(DM) Actual requirement Cost : Wood board (1373 unit *TK240) Rope( 1373 unit *TK20) Hook Screw 1373 unit*TK2) 1373unit Tk329520 TK27460 TK2746 Total Tk359726 Direct manufacturing labor budget PTOGUCE UTE DOH TOC US Wages TOCHT per unit Rate DL cost 1248 0.33 416 34 Tk14144 Wooden Hang Shelf Total direct manufacturing labor budget Tk14144 Manufacturing Overhead Cost Budget Variable OH Packaging (1248unityks) TOCK Tk6240 Transportation Tk 2000 Fixed MOH Tk15,000 Tk70 Factory rent Depreciation Supervising labors Mixed MOH Tk10000 Factory electricity Tk4000 Tk78292 Total Budgeted MOH Rate = Total Budgeted MOH cost / Cost base [Here, cost base is direct labor hour] Tk34310/416hrs =Tk82.476 per direct labor hour MOH per Unit=MOH per direct labor hour/ unit to be produce in per direct labor hour = Tk82.476/3unit per labor hour - TK27.49 per unit Manufacturing Budget pecat Tnput per unit or Cost per un OT TOLICOS output input Direct Material Wood board lunit Tk240 TK 240 Rope 1unit TK20 TK 20 Hook Screw Direct Labor | MOH Manufacturing cost per Wooden Hang Shelf 1unit 0.33 DLHS 0.33 DLHS TKC2 Tk34 per DLH Tk82.476 Per DLH TKC2 Tk11.3322 TK27.49 Tk300.82 Ending Inventory Budget Detall Cost per un Tota COSE 125 unit Tk300.82 Tk37602.77 Ending finished goods Ending inventory budget Tk37602.77 Total Total 0 Cost of Goods sold Budget Decan Beginning finished goods |(+) Cost of goods manufactured Direct Material Direct Labors Manufacturing Overhead Total goods available for sale (-) Ending inventory Cost of goods sold Tk156000 Tk13000 Tk78292 Tk247292 Tk24730 Tk222562 Budgeted Income Statement Decan DDV BUT Tk505350 Tk355991 Tk149359 Sales Revenues (1123unit*Tk450) ||- Cost of goods sold Gross Profit - Operating Expenses Supportive Cost Selling Cost Total operating cost Net Operating Income Tk2450 Tk46000 Tk48450 Tk149359 Budgeted Contribution Format Income Statement Detan Total TISO5350 Tk Sales Revenues (1123unit*Tk450) Variable cost (1123unit* (TK/1248unit)} Contribution margin Fixed cost Net Operating profit TK TK Tk MOH: We will have several MOH costs. They are: Factory rent: Our monthly factory rent will be approximately 15000 BDT, which is a fixed cost. Factory electricity: Monthly 346 Kilo-watt electricity will be used. Per kilo-watt costs 8.67 BDT.SO, factory electricity cost will be (346*8.67) = 3000 BDT, which is a variable cost. Production supervisor salary: One factory supervisor will cost 10000 BDT per month, which is indirect labor and fixed cost. Depreciation of production equipment: We will have fixed assets such as drill machine and electric jig saw machine, one fan, light etc, which will cost approximately 8400 BDT total. This asset has about ten years of useful life. So, the monthly depreciation of production equipment will be around (8400/120) = 70 BDT as we are following a straight line method of depreciation without any salvage value, which is a fixed cost. Packaging: Packaging of each product costs 5 BDT. So, the maximum packaging cost per month will be (1248-5) = 6240 BDT, which is an indirect material and variable cost. NON-Manufacturing costs Selling and administrating cost: Showroom Rent: showroom rent is 25000 BDT per month, which is a fixed cost. Sales-man salary: Salesperson's salary will be 7000 BDT per month, which is a fixed cost. Showroom Electricity bill: Approximately 461.37 kilo-watt electricity will be used in our showroom every month, which will cost (461.37*8.67) = 4000 BDT while per kilo-watt costs 8.67 BDT, which is a variable cost Outlet manager salary: Outlet manager salary will be 10000 BDT per month, which is a fixed cost. Support cost: Transportation cost: Monthly 2000 BDT transporting cost (contract basis) will occur, which is a fixed cost. Depreciation of showroom equipment: In our showroom, approximately 50000 BDT worth fixed assets will be used, such as AC, water filter, led lights etc, which will have ten years of useful life. So, depreciation of showroom equipment will be (54000/120) = 450 BDT per month, which is a fixed cost. Analysis of cost: Fixed cost: nem Total IT Depreciation Tk Tk Tk Tk Indirect labor Factory Electricity Factory rent Shop rent Shop Electricity Marketing and Advertisemer shop keeper salary Tk TK = Tk Tk Total Tk Variable cost: prem TOCATT Direct Labor Tk TK Tk Tk TK Direct Materials Transportation (Factory) Factory electricity Shop Electricity Transportation (Supportive Department) other Factory utility Telephone bill indirect Materials Total Tk TK TK TK TK Mixed cost: TEM TOCK Tk Factory electricity shop Electricity Total TK TK Under a simple costing system, we select direct labor hours as our allocation base. We are estimating these costs for one month, and we are finding the unit product cost of our product. The direct labor hour of one unit product is 0.3333 hour. And labor wage per hour 34 BDT. Total MOH cost for the month is 34310 BDT, and the total labor hour is 416 hours. Direct Material Cost per unit= Wood board + Rope +Hook Screw = 240+20+2 = 262 BDT Direct labor cost per unit = DLH per unit * Wage rate = 0.3333-34 = 11.3322 BDT POHR = Total MOH of the upcoming month / Total allocation base of upcoming month = 34310/416 = 82.476 MOH applied (one unit= POHR* Actual activity of Allocation base of one unit = 82.476* 0.3333 = 27.49 BDT Total cost of one unit = DM + DL + MOH (of one unit) = 262+11.3322+27,49 = 300.821 BDT So, under job order costing total cost of one wooden hang shelf is 300.821 BDT. We will determine the prime, conversion, and the full cost of our product. Our direct material cost is 262 BDT for one unit. The direct labor cost is 11.3322 BDT for one unit. And MOH cost is 27.4892 BDT for one unit. The maximum production of a month is 1248 units. Prime Cost = DM + DL = 262 +11.3322 -273.3322 BDT per unit. And monthly maximum prime cost, (273.3322*1248) = 341118.5856 BDT. Conversion Cost = DL + MOH = 11.3322 + 27,4892 = 38.82144 BDT per unit. And monthly maximum conversion cost, (38.82144*1248) = 48449.15 BDT. Full Cost = DL +DM+ MOH - 262+11.3322-27.4892 = 300.821 BDT per unit. And monthly maximum full cost, (300.821*1248) = 375425 2 BDT. Prime cost: (TOTAL) Prime cost = Direct Material + Direct Lab Conversion Cost: (Total) Conversion cost = Direct Labor + Manufacturing overhead Full Cost: (Total) Full cost Variable cost + Fixed cost Pricing strategy Initial Investment Investea capital TOLTUK Cash Tk Advance Factory Rent TK Advance Shop Rent TK Computer Tk Furniture Tk Banners and Leaflet TK Total Tk Target operating income = Invested capital rate of return on invested capital Selling price Cost base (full cost) + Markup Total Total cost Tk Number of unit Cost per unit (Tk/1248unit) 1248unit Tk = Detail Totar Operating profit Tk Number of unit 1248unit Markup (Tk/1248unit) Tk Detal Tokar TK Markup Cost per unit Markup (TK22.5/TK77.5) Tk % Budget: The Budgeted unit sales has been determined as 1248units. We assumed that the targeted ending inventory would be 10% of the unit budgeted sales with no Beginning Inventory Torar ending Tentory 1248 70% TZ UNTES Total Budgeted Sales unit (1248 -(1248 -10%)) - 1123 Units Sales Budget Decan Tumoerorum Price per un TULED Wooden Hang Shelf 1123 Tk450 TI 505350 Production Budget Decall TOCO Sales requirement 1123 unit (+) Target Ending Finished Goods Total needs of finished goods |(-) Beginning Finished Goods 125unit 1248 unit O unit Units need to production 1248unit = Direct Material Usage Budget Detall um Total Wood board (1248 unit* 1pc) 1248unit Rope 1248 unit*1pc) 1248unit Hook Screw( 1248 unit *1pc) 124 Bunit Total Direct materials need to production 1248unit Cost: Wood board (1248 unit *TK240) Tk299520 Ropel 1248 unitTK20) Hook Screw 1248 unit*TK2) TK24960 TK2496 Total Tk326976 Direct material purchase Budget Deta Tianlogon wou TOCI 1248unit 125unit Ounit Production needed (+) Targeted Ending Inventory(DM) -) Beginning Inventory(DM) Actual requirement Cost : Wood board (1373 unit *TK240) Rope( 1373 unit *TK20) Hook Screw 1373 unit*TK2) 1373unit Tk329520 TK27460 TK2746 Total Tk359726 Direct manufacturing labor budget PTOGUCE UTE DOH TOC US Wages TOCHT per unit Rate DL cost 1248 0.33 416 34 Tk14144 Wooden Hang Shelf Total direct manufacturing labor budget Tk14144 Manufacturing Overhead Cost Budget Variable OH Packaging (1248unityks) TOCK Tk6240 Transportation Tk 2000 Fixed MOH Tk15,000 Tk70 Factory rent Depreciation Supervising labors Mixed MOH Tk10000 Factory electricity Tk4000 Tk78292 Total Budgeted MOH Rate = Total Budgeted MOH cost / Cost base [Here, cost base is direct labor hour] Tk34310/416hrs =Tk82.476 per direct labor hour MOH per Unit=MOH per direct labor hour/ unit to be produce in per direct labor hour = Tk82.476/3unit per labor hour - TK27.49 per unit Manufacturing Budget pecat Tnput per unit or Cost per un OT TOLICOS output input Direct Material Wood board lunit Tk240 TK 240 Rope 1unit TK20 TK 20 Hook Screw Direct Labor | MOH Manufacturing cost per Wooden Hang Shelf 1unit 0.33 DLHS 0.33 DLHS TKC2 Tk34 per DLH Tk82.476 Per DLH TKC2 Tk11.3322 TK27.49 Tk300.82 Ending Inventory Budget Detall Cost per un Tota COSE 125 unit Tk300.82 Tk37602.77 Ending finished goods Ending inventory budget Tk37602.77 Total Total 0 Cost of Goods sold Budget Decan Beginning finished goods |(+) Cost of goods manufactured Direct Material Direct Labors Manufacturing Overhead Total goods available for sale (-) Ending inventory Cost of goods sold Tk156000 Tk13000 Tk78292 Tk247292 Tk24730 Tk222562 Budgeted Income Statement Decan DDV BUT Tk505350 Tk355991 Tk149359 Sales Revenues (1123unit*Tk450) ||- Cost of goods sold Gross Profit - Operating Expenses Supportive Cost Selling Cost Total operating cost Net Operating Income Tk2450 Tk46000 Tk48450 Tk149359 Budgeted Contribution Format Income Statement Detan Total TISO5350 Tk Sales Revenues (1123unit*Tk450) Variable cost (1123unit* (TK/1248unit)} Contribution margin Fixed cost Net Operating profit TK TK Tk Estimations Manufacturing Process: Wooden hang shelf will be manufactured from SFT 4FT sized partex board. These boards will be cut into a 3FT 1FT ratio, which will be the direct raw material for our product. Then our labor will drill four holes at four corners of these 3F+* 1FT board. Then they will fasten the ropes as the picture is shown. And with a hook screw from where the wooden board will be hung, our product is finished and ready to display We can make three products in 1 hour. So, to produce one unit, we need (20/60) = 0.3333 hours. Two labors will work in our factory. Each worker will work 8 hours a day and 26 days of the month. In total, they will work (8*26*2) = 416 hours a month. So, in a month, we can produce (416/0.3333) = 1248 products. So, 1248 products is our maximum production We are estimating all costs for our product. Our cost object is our product, which is a wooden hang shelf. It is the only product we are working with. So, every cost here is direct cost except packaging cost and Production supervisor salary. Manufacturing Costs: To make the actual product, we have some costs, such as direct material, direct labor, and manufacturing overhead. Together they are known as manufacturing costs. Direct Material: Wood board: One SFT 4FT sized partex board approximately costs 2400 BDT. Our product will be 3Ft* 1FT ratio. So, from 1 partex board, we can make ten products. So, one product costs (2400/10) = 240 BDT worth of partex board, which is a variable cost. Rope: We will use nylon rope. One kg of nylon rope costs 200 BDT. To make one product, we need approximately 100 grams of rope. From one kg of rope, we can make ten products. Per gram rope will cost (200/1000) = 0.2 BDT. So, one product costs (100*0.2) = 20 BDT worth of nylon rope, which is a variable cost. Hook Screw: One product needs one hook screw. One good hook screw will cost 2 BDT each, which is a variable cost (These costs are estimated from sindabad.com, and material links are given in the reference.) Direct Labor: Two labors will work in our factory. One of them will cut and polish the board into pieces, and another worker will be drilling, fastening the rope, and screwing. So, the monthly labor wage will be approximately 14144 BDT. Per labor hour costs (141441416) = 34 BDT, which is a fixed cost. MOH: We will have several MOH costs. They are: Factory rent: Our monthly factory rent will be approximately 15000 BDT, which is a fixed cost. Factory electricity: Monthly 346 Kilo-watt electricity will be used. Per kilo-watt costs 8.67 BDT.SO, factory electricity cost will be (346*8.67) = 3000 BDT, which is a variable cost. Production supervisor salary: One factory supervisor will cost 10000 BDT per month, which is indirect labor and fixed cost. Depreciation of production equipment: We will have fixed assets such as drill machine and electric jig saw machine, one fan, light etc, which will cost approximately 8400 BDT total. This asset has about ten years of useful life. So, the monthly depreciation of production equipment will be around (8400/120) = 70 BDT as we are following a straight line method of depreciation without any salvage value, which is a fixed cost. Packaging: Packaging of each product costs 5 BDT. So, the maximum packaging cost per month will be (1248-5) = 6240 BDT, which is an indirect material and variable cost. NON-Manufacturing costs Selling and administrating cost: Showroom Rent: showroom rent is 25000 BDT per month, which is a fixed cost. Sales-man salary: Salesperson's salary will be 7000 BDT per month, which is a fixed cost. Showroom Electricity bill: Approximately 461.37 kilo-watt electricity will be used in our showroom every month, which will cost (461.37*8.67) = 4000 BDT while per kilo-watt costs 8.67 BDT, which is a variable cost Outlet manager salary: Outlet manager salary will be 10000 BDT per month, which is a fixed cost. Support cost: Transportation cost: Monthly 2000 BDT transporting cost (contract basis) will occur, which is a fixed cost. Depreciation of showroom equipment: In our showroom, approximately 50000 BDT worth fixed assets will be used, such as AC, water filter, led lights etc, which will have ten years of useful life. So, depreciation of showroom equipment will be (54000/120) = 450 BDT per month, which is a fixed cost. Analysis of cost: Fixed cost: nem Total IT Depreciation Tk Tk Tk Tk Indirect labor Factory Electricity Factory rent Shop rent Shop Electricity Marketing and Advertisemer shop keeper salary Tk TK = Tk Tk Total Tk Variable cost: prem TOCATT Direct Labor Tk TK Tk Tk TK Direct Materials Transportation (Factory) Factory electricity Shop Electricity Transportation (Supportive Department) other Factory utility Telephone bill indirect Materials Total Tk TK TK TK TK Mixed cost: TEM TOCK Tk Factory electricity shop Electricity Total TK TK Under a simple costing system, we select direct labor hours as our allocation base. We are estimating these costs for one month, and we are finding the unit product cost of our product. The direct labor hour of one unit product is 0.3333 hour. And labor wage per hour 34 BDT. Total MOH cost for the month is 34310 BDT, and the total labor hour is 416 hours. Direct Material Cost per unit= Wood board + Rope +Hook Screw = 240+20+2 = 262 BDT Direct labor cost per unit = DLH per unit * Wage rate = 0.3333-34 = 11.3322 BDT POHR = Total MOH of the upcoming month / Total allocation base of upcoming month = 34310/416 = 82.476 MOH applied (one unit= POHR* Actual activity of Allocation base of one unit = 82.476* 0.3333 = 27.49 BDT Total cost of one unit = DM + DL + MOH (of one unit) = 262+11.3322+27,49 = 300.821 BDT So, under job order costing total cost of one wooden hang shelf is 300.821 BDT. We will determine the prime, conversion, and the full cost of our product. Our direct material cost is 262 BDT for one unit. The direct labor cost is 11.3322 BDT for one unit. And MOH cost is 27.4892 BDT for one unit. The maximum production of a month is 1248 units. Prime Cost = DM + DL = 262 +11.3322 -273.3322 BDT per unit. And monthly maximum prime cost, (273.3322*1248) = 341118.5856 BDT. Conversion Cost = DL + MOH = 11.3322 + 27,4892 = 38.82144 BDT per unit. And monthly maximum conversion cost, (38.82144*1248) = 48449.15 BDT. Full Cost = DL +DM+ MOH - 262+11.3322-27.4892 = 300.821 BDT per unit. And monthly maximum full cost, (300.821*1248) = 375425 2 BDT. Prime cost: (TOTAL) Prime cost = Direct Material + Direct Lab Conversion Cost: (Total) Conversion cost = Direct Labor + Manufacturing overhead Full Cost: (Total) Full cost Variable cost + Fixed cost Activities and selecting cost drivers based on the cause and effect relationship Activities Cost drivers Activity Rate Cost Consumption Total of cost drivers 1248 units 326976 Direct material Number of units produce 262 Direct labor Number of labor hours 416 Hirs. 14976 36 Factory Rent Square feet 600sft. 15000 25 Utility KW use 346 Kw 3000 8.67 Supervision/Shop keeping Total time spent 720 Hrs. 10000 13.89 Depreciation Per product 120 8400 70 BDT Packaging No. of unit sales 1248 6240 5 Salesperson salary Total time spent 720 Hirs. 7000 9.72 Showroom electricity Per kW 461.37 kw 4000 8.67 bill Unit production cost under ABC Casting Direct Material F1248262 1326976 Direct labor |-416 36 14976 Factory Rent P2.5'600 15000 Utility 5346 8.67 3000 Supervision/shop keeping 7720 33.89 10000 Depreciation F12070 13400 Packaging P124895 3240 Salesperson salary P720 9.72 7000 Showroom electricity 461373.67 4000 otal cost cost per unit 1248 units 317tk. per unit (Approx) = Product line profitability report: Simple costing: pecan TO Tota TTK Direct Material per unit Tk262 Direct Labor per unit Tk11.3322 Tk27.49 MOH per unit Product cost per unit Tk300.82 Tk561600 TK375423 TK186177 Revenue (Tk450*1248) Less: Cost of goods sold (Tk300.82*1248unit) Gross profit Less: Operating expense Net Income Net Income ratio Tk TK % Activity base costing: pecan Toca y Revenue Tk Less: Total cost (Tk 1248unit) Tk Net Income Tk = Net Income ratio % Pricing strategy Initial Investment Investea capital TOLTUK Cash Tk Advance Factory Rent TK Advance Shop Rent TK Computer Tk Furniture Tk Banners and Leaflet TK Total Tk Target operating income = Invested capital rate of return on invested capital Selling price Cost base (full cost) + Markup Total Total cost Tk Number of unit Cost per unit (Tk/1248unit) 1248unit Tk = Detail Totar Operating profit Tk Number of unit 1248unit Markup (Tk/1248unit) Tk Detal Tokar TK Markup Cost per unit Markup (TK22.5/TK77.5) Tk % Budget: The Budgeted unit sales has been determined as 1248units. We assumed that the targeted ending inventory would be 10% of the unit budgeted sales with no Beginning Inventory Torar ending Tentory 1248 70% TZ UNTES Total Budgeted Sales unit (1248 -(1248 -10%)) - 1123 Units Sales Budget Decan Tumoerorum Price per un TULED Wooden Hang Shelf 1123 Tk450 TI 505350 Production Budget Decall TOCO Sales requirement 1123 unit (+) Target Ending Finished Goods Total needs of finished goods |(-) Beginning Finished Goods 125unit 1248 unit O unit Units need to production 1248unit = Direct Material Usage Budget Detall um Total Wood board (1248 unit* 1pc) 1248unit Rope 1248 unit*1pc) 1248unit Hook Screw( 1248 unit *1pc) 124 Bunit Total Direct materials need to production 1248unit Cost: Wood board (1248 unit *TK240) Tk299520 Ropel 1248 unitTK20) Hook Screw 1248 unit*TK2) TK24960 TK2496 Total Tk326976 Direct material purchase Budget Deta Tianlogon wou TOCI 1248unit 125unit Ounit Production needed (+) Targeted Ending Inventory(DM) -) Beginning Inventory(DM) Actual requirement Cost : Wood board (1373 unit *TK240) Rope( 1373 unit *TK20) Hook Screw 1373 unit*TK2) 1373unit Tk329520 TK27460 TK2746 Total Tk359726 Direct manufacturing labor budget PTOGUCE UTE DOH TOC US Wages TOCHT per unit Rate DL cost 1248 0.33 416 34 Tk14144 Wooden Hang Shelf Total direct manufacturing labor budget Tk14144 Manufacturing Overhead Cost Budget Variable OH Packaging (1248unityks) TOCK Tk6240 Transportation Tk 2000 Fixed MOH Tk15,000 Tk70 Factory rent Depreciation Supervising labors Mixed MOH Tk10000 Factory electricity Tk4000 Tk78292 Total Budgeted MOH Rate = Total Budgeted MOH cost / Cost base [Here, cost base is direct labor hour] Tk34310/416hrs =Tk82.476 per direct labor hour MOH per Unit=MOH per direct labor hour/ unit to be produce in per direct labor hour = Tk82.476/3unit per labor hour - TK27.49 per unit Manufacturing Budget pecat Tnput per unit or Cost per un OT TOLICOS output input Direct Material Wood board lunit Tk240 TK 240 Rope 1unit TK20 TK 20 Hook Screw Direct Labor | MOH Manufacturing cost per Wooden Hang Shelf 1unit 0.33 DLHS 0.33 DLHS TKC2 Tk34 per DLH Tk82.476 Per DLH TKC2 Tk11.3322 TK27.49 Tk300.82 Ending Inventory Budget Detall Cost per un Tota COSE 125 unit Tk300.82 Tk37602.77 Ending finished goods Ending inventory budget Tk37602.77 Total Total 0 Cost of Goods sold Budget Decan Beginning finished goods |(+) Cost of goods manufactured Direct Material Direct Labors Manufacturing Overhead Total goods available for sale (-) Ending inventory Cost of goods sold Tk156000 Tk13000 Tk78292 Tk247292 Tk24730 Tk222562 Budgeted Income Statement Decan DDV BUT Tk505350 Tk355991 Tk149359 Sales Revenues (1123unit*Tk450) ||- Cost of goods sold Gross Profit - Operating Expenses Supportive Cost Selling Cost Total operating cost Net Operating Income Tk2450 Tk46000 Tk48450 Tk149359 Budgeted Contribution Format Income Statement Detan Total TISO5350 Tk Sales Revenues (1123unit*Tk450) Variable cost (1123unit* (TK/1248unit)} Contribution margin Fixed cost Net Operating profit TK TK Tk