ACT 333

Final Project

Faculty Advisor:

Nabila Nisha (Nbn)

Group Name: Team Work

Team members

Section: 2

Date: 15-4-2015
 LETTER OF TRANSMITTAL

Dear Madam,
We would like to thank you for giving us the opportunity to have the chance to work on this
project. We have tried our best to address the major and in depth issues in making this report
accurate and reliable. We have tried to use our Cost accounting knowledge accurately which we
have learnt in the class.
If you have any further enquiry regarding any additional information, we would be very pleased
to clarify that. You can contact us Thank you.

Sincerely yours
Khandoker Rafiul Hasan

Abstract
This project deals with the analysis of costs, related to the making of our product. The product
that we have chosen is Table Mat. Initially we have done an industry & competitor analysis to
learn about the table mat industry. It is a handicraft product and we have chosen that product
because table mats were thought to enchant the atmosphere around a home or business in the
ancient far east. A unique design table mat is an attractive and interesting gift idea. In this
project, we have discussed about its manufacturing process. Estimation of all related costs like
Direct & indirect materials costs, Direct & indirect labor costs, rent, telephone bill, maintenance
costs etc. is included. Then we have categorized all the cost under direct/indirect &
Fixed/variable cost categories. Using the simple costing system, we have determined the unit
product cost of our product, allocated the support cost to operating cost using direct method.
Besides, we have also determined the prime cost, conversion cost & full cost. In addition, we
have determined per unit product cost using Activity Based Costing system. Product-line
profitability report is also done using simple costing & ABC. The pricing strategy of our product
is also discussed here. All types of budgets that are required are prepared in this report as
well. Moreover, a budgeted income statement is discussed using both traditional and
contribution margin format. We have also determined the break-even point, break-even
revenue & margin of safety. Finally, we conducted a sensitivity analysis under three given
scenarios.
 Table of Contents

Topics Pages
About Crafts Limited 1
Why Table Mat? 1
Industry Analysis 2
Competitive Analysis 2
Manufacturing Process of the product 2
Job order Costing Method 3
Capital Costs 4
Analysis of All Types of Costs:
Costs Related to Table Mat 4
Cost Analysis 5
Assuming Simple Costing System 6
Direct Costs 7
Indirect Costs 8
Support Costs 9
Prime Costs 9
Conversion Costs 10
Full Costs 10
Assuming ABC System 12
Pricing Strategy 16
Budget 16
Break-Even Analysis 22
Sensitivity Analysis 23
Recommendation 25
 Final project | Twinkle Wind Chime ACT 333

About Crafts Limited

Crafts Limited Launched wind chime under the new brand called Twinkle by 5

entrepreneurs in May 2015 as a side business targeting Social-economic class A, B and C of

Bangladesh. We are currently a web based business mainly and give supply to some retailer as
well. Currently, we are producing wind chimes having different color and designs. Our
workshop is located at Mirpur, Dhaka. We have a plan to expand our business if it blooms
successfully as projected. Our business will have a simple opening without any big promotion or
advertisement. We will go for online promotion and word of mouth from owners to their
friends and relatives.

Actually the entrepreneurs are starting the business as their creative notions drove them to
inaugurate such a product which is not usual at all. The purpose of this business is to décor the
home with innovative decoration pieces which will create a soothing environment with the
blow of the wind. This business will provide customer options to customize their products. Our
incentives to our customers are to provide high quality handicraft décor piece at reasonable
price. Our future plan is to expand our product range, increase the innovation of product and
make our product completely unique from our competitor.

Why wind chime?

The business that we have chosen is wind chime manufacturing business. We manufacture only
wind chimes of different colors and designs. The reason why we have chosen this business is
that it is very common in Bangladesh and the number of users is increasing day by day because
it needs in home decoration. Many users, especially youngsters, housewives usually like to use
wind chimes for decorating their home. They like this to customize their room and make their
house unique. It is a profitable business in Bangladesh & easy to use. We’ll try to provide our
customers with the best quality of products. Besides, wind chimes will be fashionable and

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trendy. We will offer options to our customers to customize it with their ch oice. The young
generations and women will be main target consumer of it. It considers for gift purpose as well.

Industry Analysis

Wind chimes manufacturing industry is not very large in Bangladesh. They are mostly imported
from Japan, Korea and China. These imported wind chimes accessories are only available in
exclusive shops in Bangladesh like Archies, Hallmark etc. We are ready to serve our customers
with unique, fully handmade designed wind chimes. Wind chime market is completely
dependent on the demand of decorative product which is growing rapidly in our country.

Competitors Analysis

We have found few businesses in Dhaka city as our main competitors. As we have a plan to
supply wind chime to Hallmarks, Archis. So they will not be our competitor. We consider the
shops in New market, Gulshan, Banani, Dhanmondi and Uttara abd other gift shops as our
competitors. The price ranges of these wind chimes are around Tk. 200 to Tk.700 in those
shops.

Manufacturing process of the product

We only produce handcraft wind chimes. The wind chimes are consists of five steps in which we
can make it with better design. The primary element that we used for wind chimes is plastic
unused bottle and the secondary elements are stone, kundan, glitter, lace, bell, plastic thread,
plastic pearl etc . The process of making wind chimes is given below:

Step1: At first, we have to take a plastic bottle. This bottle can be any color and have to cut into
two pieces and we will take the upper half of the bottle for our product.

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Step 2: Then again we cut that piece of bottle’s lower part into many slices to give it a attractive
shape.

Step 3: Then we have to put stone, kundan, lace & glitters on the bottle with the help of glue to
give it a beautiful design. We will fix some big and small bell on the bottle so that whenever the
wind blows it can make a sweet sound. We have to follow the same process to make four
bottles in the same way.

Step 4: We have to take a round shape bamboo frame and have to cover it with a colorful lace.
Then we have to put three plastic threads and need to fill them up with plastic pearl so that the
plastic part cannot be seen.

Step 5: Finally the four bottles we have

made before with the help of three plastic
threads which are full with pearls have to
join and hang them. At the very top there
is one bottle and then in the middle there
are three bottles. On the top a ring is
attached in order to hang it on the wall,
door or anywhere. Now the product is ready to sell.

Job Order Costing Method

Crafts Limited follows Job Order Costing method for their Twinkle wind chime. This costing
system is used in situations where different products are produced each period. It is used for
assigning manufacturing costs to an individual product or batches of products. Since, there is a
significant variation in the products manufactured; the job order costing system will create a
job cost record for each item, job or special order. The job cost record will report the direct
materials and direct labor actually used the manufacturing overhead assigned to each job. The

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job cost records also serve as the subsidiary ledger or documentation for the cost of the work-
in-process inventory, the finished goods inventory, and the cost of goods sold. In a job order
costing system, costs are traced to the jobs and then the costs of the job are divided by the
number of units in the job to arrive at an average cost per unit.
Crafts Ltd. used job costing to allocate cost of direct material, direct labor and manufacturing
overhead.

Capital Costs

Capital costs are fixed one-time expenses, which are incurred on the purchase of assets for
investment purposes and are used in the manufacturing of goods and for providing various
services.
As we are 5 partners of this business, everyone would have an equal share and would
contribute with an equal share of financing with Tk. 8,000 each, summing up to Tk. 40,000
Capital in total.

Analysis of all types of costs _ _ _ _

Costs Related to WIND CHIME:

All Costs Tk. (200 Units)

Pearl (18*200) 3600

Colorful suta (5*200) 1000

Glue 750
Niddle 50
Sim card 150

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Seissor 80
Labor 2400
Cleaning Labor 500
Tab 4000
Rent 2000
Electricity Cost 500
Internet Bill 500
Delivery Cost 2000
Total Cost 17530

Source: Chandni Chawk (2nd Floor) - Wholesale Shop

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Cost Analysis

Cost Object: Wind Chime

All Costs Direct Indirect Fixed Variable

Pearl  

Colorful suta  

Glue  

Niddle  

Sim Card  

Labor  

Rent  

Electricity Cost   

Seissor  

Tab  

Internet & Mobile Bill  

Cleaning Labor  

Delivery Cost  

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Assuming Simple Costing System

Total Cost of the Wind Chime: Tk. 17530

Allocation Base: Units of Wind Chime Produce

Per Unit Wind Chime Cost = (Tk. 17530 / Tk. 200) = Tk. 87.65 per Wind Chime

Direct Costs

Direct costs can be traced directly to a cost object such as a product or a department. In other
words, direct costs do not have to be allocated to a product, department, or other cost object.
The direct costs of Crafts Ltd. would include the costs of:
Direct materials: Represents the cost of the materials that can be identified directly with the
Product at reasonable cost.

Direct Materials: Tk. (200 Units) Tk. Per Unit

Pearl 3600 18
Colorful suta 1000 5
Total Direct Material 4600 23

Direct labor: Represents the cost of the labor time spent on that product.

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Direct Labor: Tk. (200 Units) Tk. Per Unit

Labor (6 persons) 2400 12
Total Direct Labor 2400 12

Indirect Costs

These are costs or expenses that are not directly traceable to a product and thus are often
allocated to the product.

Manufacturing Overhead: Represents all production costs except those for direct labor and
direct materials.

Manufacturing Overhead:

Indirect Materials: Tk. (200 Units) Tk. Per unit

Glue 50 0.25

Seissor 80 0.4
Total Indirect Material 130 0.65

Indirect Labor: Represents the cost of the labor time spent on the market research for the
product.

Indirect Labor: Tk. (200 Units) Tk. Per Unit

Cleaning Labor (1 person) 500 2.5
Total Indirect Labor 500 2.5

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Indirect Material: Represents the cost of the materials that can be identified directly with the
product at reasonable cost.

Other Factory Cost: Tk. (200 Units) Tk. Per Unit

Tab 4000 20
Rent 2000 10
Mobile Sim 150 0.75
Electricity Cost 500 2.50

Internet & Mobile Bill 500 2.50

Delivery Cost 2000 10

Total Other Factory Cost 9150 45.75

Support Costs
We follow DIRECT method for allocating our support cost.

Communication (Support Cost) = Tk. 4000 + 150 + 500 = Tk. 4650

Delivery Cost = Tk. 2000

SUPPORT DEPARTMENT OPERATING DEPARTMENT

Communication Delivery Cost Production

Costs TK. 4650 Tk. 2000

Allocation Cost of Communication
(100 / 100) (Tk. 4650) --- Tk. 4650
Allocation Cost of Delivery Cost
(100 / 100) --- (Tk. 2000) Tk. 2000
Total Costs Tk. 0 Tk. 0 Tk. 6650
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Prime Cost
Prime Cost = Total Direct Material + Total Direct Labor

Tk. (200 Units) Tk. Per Unit

Total Direct Material 4600 23
Total Direct Labor 2400 12
Prime Cost 7000 35

Conversion cost
Conversion Cost = Total Direct Labor + Total Manufacturing Overhead

Tk. (200 Units) Tk. Per Unit

Total Indirect Material 130 0.65
Total Indirect Labor 500 2.5
Total Other Factory Cost 9150 45.75
Total Manufacturing Overhead 9780 48.9

Tk. (200 Units) Tk. Per Unit

Total Direct Labor 2400 12
Total Manufacturing Overhead 9780 48.9
Conversion Cost 16840 84.20

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Full Cost (Variable cost+ Fixed Cost+ Mixed Cost)

Variable Costs

Variable costs are costs, which change with respect to the level of activities or the units
produced. A detailed analysis of the variable costs associated with each unit of wind chimes
Manufactured by Crafts Ltd. is given below:

Variable Costs Tk. (200 Units) Tk. Per Unit

Pearl 3600 18
Colorful Suta 1000 5
Glue 750 3.75
Niddle 50 0.25
Electricity 500 2.5
Internet and Mobile Bill 500 2.5
Delivery Cost 2000 10
Total Variable Cost 8400 42

Fixed Costs

Fixed costs are costs, which remain constant within a certain level of output or sales. The fixed
costs remain constant regardless of the level of activity within a certain limit which is called the
relevant range.

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Fixed Costs Tk. (200 Units) Tk. Per Unit

Seissor 80 0.4
Labor 2400 12
Cleaning Labor 500 2.5
Tab 4000 20
Mobile Sim 150 0.75
Rent 2000 10
Total Fixed Costs 9130 45.65

Mixed Costs

These are the costs that have both fixed and variable components. For Crafts Ltd. this would
include the electricity bills that have been incurred for communication purposes.

Mixed Cost Tk. (200 Units) Tk. Per Unit

Electronic Cost 500 2.5
Total Mixed Cost 500 2.5

Full cost:

Full Cost = Variable Costs + Fixed Cost + Mixed Cost

Full Cost Tk. (200 Units) Tk. Per Unit

Total Variable Cost 8400 42

Total Fixed Cost 9130 45.65
Total Mixed Cost 500 2.5
Total Full Cost 18030 90.15

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Assuming ACTIVITY-BASED Costing System

Indirect Materials Cost in Tk. Cost Driver Cost in Tk. per Wind Chime
Glue 750 200 Wind Chime 3.75

Seissor 80 200 Wind Chime 0.4

Cost Driver for all the Indirect Material is the number of Wind Chime produced because all of
these indirect materials are related to the production. So, if we increase or decrease the
number of production, cost will also increase or decrease. Thus, cost per Wind Chime will also
change.

Indirect Labor Cost in Tk. Cost Driver Cost in Tk. per Square Feet
Cleaning Labor 500 150 square feet 3.33

Cost Driver for Indirect Labor is in per Square Feet basis because cleaning labor is kept for
cleaning 150 square feet floor. In future, if we take larger space cost of indirect labor will
increase.

Manufacturing Overhead Cost in Tk. Cost Driver Cost in Tk. Per

Tab 4000
Rent 2000 150 square feet 13.33 / sq. f
Mobile Sim 150
Electricity Cost 500 200 Wind Chime 2.5 / Wind Chime

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Internet & Mobile Bill 500

Delivery Cost 2000 100 orders 20 / order

Cost Driver for Glue Gum Machine is per machine hour because the machine is used in making
the Wind Chime for hours. In a month we work for 20 days. In one day, we use the equipment
for 2 hours. So, for one month, we use the glue gum machine for 40 hours. In future, if we
increase our production we need to increase the machine hour.

Cost Driver for rent, electronic instrument and cleaning product is per square feet because all
these three are related to square feet. Rent and cost of electronic instrument will increase if a
square feet increases.

Cost Driver for electricity cost is number of Wind Chime produced because if we increase our
production we will need of more time which will increase electricity cost.

Cost Driver for delivery cost is number of orders because delivery is made when orders are
placed.

Calculation of Cost of Goods Sold:

Tk. Tk.

Beginning Finished Goods Inventory 0

Add: Cost of Goods Manufactured:
Direct Material 4600
Direct Labor 2400
Manufacturing Overhead 5990 27890
Goods Available for Sale 27890
Less: Ending Finished Goods Inventory (3524)
Cost of Goods Sold 24366

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Rough:
Ending Finished Goods Inventory = (200 Wind Chime * 10%) * Tk. 176.20

= 20 Wind Chime * Tk. 176.20

= Tk. 3524

Wind Chime has a less Competitive market. You can find in different stores like Hallmark,
Archies, etc. with different price range from Tk. 350 to Tk. 1000. There are many types of Wind
Chime which are almost similar in visual and quality.

Our Wind Chime is handmade product. It is not like the ones in the market. Thus, we select our
pricing strategy on the basis of Cost – Based / Cost – plus Approach. So, the price of one Wind
Chime would be Tk. 220. We hold on to 25% of profit on cost.

Compare to the market, we are selling at a lower price than the competitor’s one.

Simple Costing System

Tk.
Revenue (Tk. 220 * 180 Wind Chime) 39600
Delivery Revenue (Tk50 * 100 Orders) 5000
Total Revenue 44600
Less: Direct Cost:
Cost of Goods Sold (22366)
Operating Profit 20234

% of Operating Profit to Revenue 45.36%

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Activity-Based Costing System

Tk. Tk.
Revenue (Tk. 220 * 180 Wind Chime) 39600
Delivery Revenue (Tk. 50 * 100 Orders) 5000
Total Revenue 44600
Less: Direct Cost:
Cost of Goods Sold (22366)
Less: Indirect Cost:
Delivery Cost 2000
Communication 5350 (7350)
Operating Income 14884
% of Operating Profit to Revenue 33.37%

Pricing strategy

Price is the value that has to put to a product or service and is the result of a complex set of
calculations, research and understanding and risk taking ability. A pricing strategy takes into
account segments, ability to pay, market conditions, competitor actions, trade margins and
input costs, amongst others. It is targeted at the defined customers and against competitors.
Crafts Ltd. is using cost-based pricing strategy as it would focuses on maximizing its rate of
return. This strategy is beneficial for the company as it somewhat provides flexibility, based
partially on customers and competitors. The price can be set to maximize profitability for each
unit sold or from the market overall. It can be used to defend an existing market from new
entrants, to increase market share within a market or to enter a new market. Businesses may
benefit from lowering or increasing prices, depending on the needs and behaviors of customers
and clients in particular market. Finding the right pricing strategy is an important element in
running a successful business. A company will set a price at which they would be able to attract
customers. Actually we did not select market based pricing because our product is fully
handmade though it is a wind chime. We hardly take help from machine. Our product is

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completely unique from other products which are serving currently in the market. That is why
we select cost based pricing strategy as we have to recover our investment. Final price of our
wind chime is 220 taka/piece, whereas, our competitors’ product price is 200-700 Taka/piece.

BUDGET

Schedule 1 Revenue Budget

Units Selling Price / Unit Total Revenues
Wind Chimes 180 220 39600
Delivery Revenue 5000
44600

Production
Schedule 2
Budget
Wind Chimes
Units to be Sold 180
Add: Target Ending
20
Inventory
Total Needs 200
Less: Beginning Inventory 0
Units to be Produced 200

Direct
Materia
Schedule 3 a
l Usage
Budget
Ring Ring Rock
Bottle Frame Pearl Lace
(Large) (Small) Thread
Glitter Kundon Total
Physical
Units:
Bottle
(200 * 4 800
bottles)
Frame
(200 * 1 200
frame)
Pearl 20
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(200 * 100 gram

pearls) / 1000gm
Lace
(200 * 2 400
goj)
Ring
(Large)
800
(200 * 4
Rings)
Ring
(Small)
400
(200 * 2
ounce)
Rock
Thread
8000
(200 * 40
inch)
Glitter
(200 * .5 100
bottle)
Kundon
(200 * .5 100
ounce)
Total Quantity
of Materials to 800 200 20 400 800 400 8000 100 100
be Used

Costs:
Available form
Beginning 0 0 0 0 0 0 0 0 0
Inventory
To be
Used from
Purchased
:
Bottle (800
800
* Tk. 1)
Frame
(200 * Tk. 1000
5)
Pearl ( 20 400

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* Tk. 200) 0
Lace (400
2000
* Tk. 5)
Ring
(Large)
3000
(800 * Tk.
3.75)
Ring
(Small)
4000
(400 * Tk.
10)
Rock
Thread
1000
(8000 * Tk
.125)
Glitter (100
600
* Tk. 6)
Kundon
(100 * Tk. 2000
20)
Total Cost of
Material to be 800 1000 4000 2000 3000 4000 1000 600 2000 18400
Used

Schedule 3 b Direct Material Purchase Budget

Ring Ring Rock
Bottle Frame Pearl Lace
(Large) (Small) Thread
Glitter Kundon Total
Physical
Units:
Material to
800 200 20 400 800 400 8000 100 100
be Used
Add: Target
Ending Inventory 120 30 3 60 120 60 1200 15 15
of Material
Total Needs 920 230 23 460 920 460 9200 115 115
Less:
Beginning 0 0 0 0 0 0 0 0 0
Inventory
Total Quantity of
Material to be 920 230 23 460 920 460 9200 115 115
Purchased

Costs:
Bottle (920 *
920
Tk. 1)

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Frame (230 *
1150
Tk. 5)
Pearl (23 *
4600
Tk. 200)
Lace (460 *
2300
Tk. 5)
Ring (Large)
(920 * Tk. 3450
3.75)
Ring (Small)
4600
(460 * Tk. 10)
Rock Thread
(9200 * Tk. 1150
.125)
Glitter (115 *
690
Tk. 6)
Kundon 115*
2300
Tk. 20)
Total Cost of
Material to be 920 1150 4600 2300 3450 4600 1150 690 2300 21160
Purchased

Schedule 4 Direct Labor

Cost Budget
Unit Hour / Wind Total Wage / Total
Produced Chime Hour Hour
Wind 200 2.5 500 7 3500
Chime

Manufacturing
Overhead
Schedule 5 Budget

Total
Variable Manufacturing
Overhead:
Glue 250
Glue Gum 600 850
Fixed Manufacturing Overhead:
Seissor 90
Cleaning Labor 200

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Glue Gum Machine 1000

Tab 5000
Rent 1500
Mobile Sim 50
Electronic Instrument 2000
Cleaning Product 100 9940
Mixed Manufacturing Overhead:
Electricity Cost 250
Total Manufacturing Overhead 11040

Ending
Schedule 6 Inventory
Budget
Ending Cost /
Total
Units Unit
Direct Material:
Bottle 120 1 120
Frame 30 5 150
Pearl 3 200 600
Lace 60 5 300
Ring (Large) 120 3.75 450
Ring (Small) 60 10 600
Rock Thread 1200 0.125 150
Glitter 15 6 90
Kundon 15 20 300
Finished Goods 20 176.2 3524
Total Ending Inventory 6284

Cost of
Goods
Schedule 7
Sold
Budget
Tk. Tk.
Beginning Finished Goods Inventory 0
Add: Cost of Goods
Manufactured:
Direct Material Used 18400
Direct Labor Cost Incurred 3500
Manufacturing Overhead Cost 11040 32940
Goods Available for Sales 32940

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Less: Ending Finished Goods 6284

Cost of Goods Sold 26656

Budgeted Income Statement (Traditional

Schedule 8( a)
Format)

Wind Chime
Budgeted Income Statement
For the Month Ended
Tk. (180 Units) Tk. Per Unit
Revenue 44600 247.7778
Less: Cost of Goods Sold 26656 148.0889
Gross Profit 17944 99.68889
Less: Operating Expenses:
Delivery Cost 2000 11.11111
Internet & Mobile Bill 300 1.666667
Operating Income 15644 86.91111

Schedule 8 (b) Budgeted Income Statement (Contribution Format)

Wind Chime
Budgeted Income Statement
For the Month Ended
Tk. (180 Units) Tk. Per Unit
Sales 44600 247.7778
Less: Variable Costs{[(21550/200)*180] + (250*
19395 107.75
0.80)}
Contribution Margin 25205 140.0278
Less: Fixed Costs{[13440/200)*180] + (250*
12146 67.47778
0.2)}
Operating Income 13059 72.55

Break-even Analysis

Break-even Quantity = (Operating Income + Fixed Cost) / (Contribution Margin per Unit)

= (Tk. 0 + Tk. 13440) / (Tk. 140.03)

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= 96 Wind Chime

Margin of Safety (MOS) = Budgeted Sales – Break-even Sales

= (Tk. 220/Wind Chime * 180 Wind Chimes) – (Tk. 220/Wind Chime * 180

Wind Chimes)

= Tk. 39600 – Tk. 21120

= Tk. 18480

MOS (%) = (Tk. 18480 / Tk. 39600) * 100

= 46.67 %

Break-even Revenue: In the break-even point, we sell only 96 Wind Chimes.

So, the Break-even Revenue = 96 Wind Chimes * Tk. 220 per Wind Chime

= Tk. 21120.

Sensitivity Analysis

01) A 15% increase in prices of all the direct materials

As there is an increase in prices of all the direct materials, the total cost of all individual direct
material will increase which increases the total cost of material to be used to Tk. 21160 in
Direct Material Usage Budget. The total cost of material to be purchased will also increase to
Tk. 24334 in Direct Material Purchase Budget.

In Ending Inventory Budget, the value of total ending inventory will increase to Tk. 6974. As it
increases, in Cost of Goods Sold Budget the value of cost of goods sold will increases to Tk.
28726. Thus, in Traditional Budgeted Income Statement the operating income value decreases

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to Tk. 13574 and in Contribution Budgeted Income Statement the operating income value
decreases to Tk. 10375.

All other Budget does not have any affect in this 15% increases in prices of all the direct
materials.

02) A 12% decreases in the demand of your product (i.e. budgeted sales units)

This decrease in demand will reduce the selling units to 158 Wind Chimes which decreases the
Wind Chimes Revenue to Tk. 34760. Thus, the total revenue in the Revenue Budget reduces to
Tk. 39760. Target ending inventory would be 17 Wind Chimes which reduces the units to be
produce to 175 Wind Chimes.

The total quantity of all the material to be used would decreases and total cost of material to
be used in Direct Material Usage Budget would decrease to Tk. 16100 and the total quantity of
all the material to be purchased would decrease and the cost of material to be purchased
would decrease to Tk. 18515.

In Direct Labor Cost Budget the value of direct labor Cost will decrease to Tk. 3062.5. In
Manufacturing Overhead Budget, the value of total manufacturing cost will decrease to Tk.
10933.75 due to decreases in variable manufacturing overhead cost.

In Ending Inventory Budget, the value of total ending inventory will decrease to Tk. 5410.4. As it
decreases, in Cost of Goods Sold Budget the value of cost of goods sold will decrease to Tk.
24685.85. Thus, in Traditional Budgeted Income Statement the operating income value
decreases to Tk. 12774.15 and in Contribution Budgeted Income Statement the o perating
income value decreases to Tk. 8893.75.

03) A 18% increase in the demand of your product (i.e. budgeted sales units)

This increase in demand will increase the selling units to 212 Wind Chimes which increase the
Wind Chimes Revenue to Tk. 46640. Thus, the total revenue in the Revenue Budget increases to
Tk. 51640. Target ending inventory would be 24 Wind Chimes which increases the units to be
produce to 236 Wind Chimes.
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The total quantity of all the material to be used would increases and total cost of material to be
used in Direct Material Usage Budget would increase to Tk. 21692 and the total quantity of all
the material to be purchased would increase and the cost of material to be purchased would
increase to Tk. 24968.8.

In Direct Labor Cost Budget the value of direct labor Cost will increase to Tk. 4130. In
Manufacturing Overhead Budget, the value of total manufacturing cost will increase to Tk.
11193 due to increases in variable manufacturing overhead cost.

In Ending Inventory Budget, the value of total ending inventory will increase to Tk. 7485.6. As it
increases, in Cost of Goods Sold Budget the value of cost of goods sold will increase to Tk.
29529.4. Thus, in Traditional Budgeted Income Statement the operating income value increases
to Tk. 19810.6 and in Contribution Budgeted Income Statement the operating income value
increases to Tk. 20099.

Recommendations

 Company should build strong relationship with the customers and supplier. So that
company can achieve customer satisfaction and supplier will ensure regular availability
of raw materials in a very lucrative price.
 Company should increase promotion by advertisement like print ad or it can be used in
any drama or movie. It can be decorated in super shops so that it will attract customers.
 Company should increase economic of scale through efficiency and effectiveness.
 As handicraft wind chime is a very unique product, company can make this as their
weapon and can utilize this to increase sales and production.

25 Crafts Limited | North South University

 Final project | Twinkle Wind Chime ACT 333

26 Crafts Limited | North South University