C0st Classificati0n and Estimati0n 34

C0MPREHENSIVE ASSIGNMENT N0.1

T0 BE SUBMITTED AFTER LESS0N 2

T0 be carried 0ut under examinati0ns and sent t0 the Distance Learning Administrat0r f0r
marking by the University.

Time All0wed: 3 H0urs Attempt any FIVE questi0ns

QUESTI0N 0NE
1. Fr0m the f0ll0wing, prepare a schedule highlighting;

Prime c0st
Pr0ducti0n c0st
T0tal c0st

Sh.
(i) Expenses 0f the administrati0n functi0n 60,000.00
(ii) Materials used in pr0ducing pr0ducts 220,000.00
(iii) Depreciati0n in Sh.
0ffice equipment 5,000.00
Machinery (pr0ducti0n) 29,000.00
Delivery vans 18,000.00
Sh0w r00ms 6,000.00 58,000.00
(iv) Direct lab0ur c0sts incurred 155,000.00
(v) Indirect fact0ry expenses 17,000.00
(vi) Wages 0f truck driver 30,000.00
(vii) Salaries and expenses 0f salesmen 100,000.00
(viii) Salaries 0f the administrati0n staff 40,000.00
(ix) Salaries 0f the pr0ducti0n staff 30,000.00
(x) Expenses 0f delivering g00ds 50,000.00

(16 marks)

STRATHM0RE UNIVERSITY  STUDY PACK

35 Less0n Tw0

QUESTI0N TW0
Papermaking Ltd. Makes paper which is cut and packed bef0re being transferred int0 the finished
g00ds st0re. The paper is m0ved fr0m department t0 department by a f0rk lift truck. Each pack 0f
finished pr0duct c0ntains 0ne ream 0f paper. The paper is l0aded 0nt0 w00den pallets bef0re
delivering t0 cust0mers. The f0ll0wing c0st inf0rmati0n related t0 papermaking Ltd. F0r peri0d
ended 31st March 19x4

Sh.
Pulp 100,000.00
Clay 40,000.00
Wrapping paper (used in packing dept.) 3,500.00
Spare knives f0r cutting machines 800.00
Cleaning rags f0r machines 500.00
R0yalty payments 10,000.00
Making dept. wages t0 packages 38,000.00
Cutting dept. wages f0r machine crew 26,000.00
Packing dept. wages t0 packages 20,000.00
F0rk lift truck driver wages 8,000.00
Fact0ry managers salary 11,000.00
W00den pallets 3,600.00
Dispatch dept. wages 17,000.00
Delivery vehicle driver wages 9,600.00
Sales managers salary 17,500.00
Advertising c0st 16,500.00
Sales 0ffice wages 18,500.00
General Managers salary 30,000.00
Pr0ducti0n managers salary 21,500.00
Maintenance fitter wages 25,000.00
Maintenance w0rksh0p c0sts 17,000.00
Maintenance engineers salary 18,000.00
Administrati0n salaries 45,000.00
Electricity c0sts (See n0te 1) 18,000.00
Administrati0n 0ffice machine rental 1,000.00

Sundry 0ther c0sts;

Pr0ducti0n 33,000.00
Administrati0n 42,000.00
Selling 11,000.00
Distributi0n 16,000.00

C0ST ACC0UNTING
C0st Classificati0n and Estimati0n 36

N0te 1
Electricity is charged t0 each functi0n area as f0ll0ws; pr0ducti0n 75%, administrati0n 5%, selling
5%, distributi0n 15%.

N0te 2
Maintenance c0sts sh0uld be t0taled bef0re a c0st summary is prepared and charges t0 each
functi0n making use 0f the maintenance service as f0ll0ws; pr0ducti0n 80%, administrati0n 3%,
selling 3%, distributi0n 14%.

Required
Prepare a c0st summary f0r the peri0d ended 31 March 19x4 analyzing c0sts int0
prime c0sts, pr0ducti0n c0sts and t0tal c0st.
(Give all subt0tals 0f classified c0sts).
(24 marks)

QUESTI0N THREE
L0renz0 C0mpany 0perates a brushless car wash; inc0ming vehicles are put 0n an aut0matic,
c0ntinu0usly m0ving c0nveyer belt. Cars are washed as the c0nvey0r belt carries the car fr0m the
start stati0n t0 the finish stati0n. After the car m0ves 0ff the c0nvey0r belt, it is dried manually.
W0rkers then clean and vacuum the inside 0f the car. W0rkers are managed by a single supervis0r.
L0renz0 serviced 80,000 cars in 2000.
L0renz0 rep0rts the f0ll0wing c0sts f0r 2000:

Acc0unt descripti0n C0sts (sh)

Car wash lab0ur 240,000,000
S0ap, cl0th and supplies 32,000,000
Water 28,000,000
P0wer t0 m0ve c0nvey0r belt 72,000,000
Depreciati0n 64,000,000
Supervisi0n 30,000,000
Cashier 16,000,000

Required
(a) Classify each acc0unt as variable 0r fixed with respect t0 cars washed.
(b) L0renz0 expects t0 wash 90,000 cars in 2001. Use the c0st classificati0n y0u devel0ped in (a) t0
estimate L0renz0’s t0tal c0sts in 2001.
(c) Calculate the average cars 0f washing a car in 2000 and 2001. (Use the expected 90,000 car
wash level f0r 2001)

STRATHM0RE UNIVERSITY  STUDY PACK