Task 1.

PRODUCTION COST – Direct

Production. Department. Cost – Indirect – no documents to show to allocate this cost
Adminstrative - Indirect
Selling cost – Indirect

Sunk cost - Decision in the past/ (depreciation)we don’t have influence on this cost, long term cost
(insurance, rental cost) - only these 3 are sunk cost remember for exams!

Problem:
Assign costs to a proper group of costs.
Solution:
put an "x" in an appropriate cell:
Variable
Cost of raw materials
Depreciation of a production building
<root/>building
Depreciation of an office
Annual office building rental costs
Salary of Business Unit Manager
Cost of energy used in production process
Cost of energy used in office building
Salaries of production line workers
Cost of office supplies
Maintenance cost of production line
Cost of product delivery to customers
Costs of sales commission
Annual insurance of office building
Fixed Direct Indirect Sunk
X X
X X X
X X X
X X X
X X
X X
X X
X X
X X
X x
X X
X X
X X X

Task 2.
Problem:
A company produces two different assortments of products: A and B. They gained the following revenue
and incurred the following costs during specific time period.
 Item Product A Product B
Price 20.00 30.00
Variable cost per unit 15.00 20.00
Number of products 20,000 10,000
Total fixed costs 60,000.00

Calculate:
1. The gross margin per unit of products A and B,
2. The operating profit for the volume of production,
3. The break-even point by quantity.

Solution:
Questions Product A Product B
Volume of sales 20,000 10,000
Price 20.00 30.00
Variable costs per unit 15.00 20.00
Gross margin per unit (1.) 20-15=5 30-20=10
Total gross margin 5x20.000+10x10.000=200,000.00
Total fixed costs 60,000.00
Operating profit (2.)
Share in total production
Weighted average margin
Break-even point by quantity (3.)
Break-even point by quantity (3.)

Task 3.
Problem:
A company produces one assortment of products. They gained the following revenue and incurred the
following costs during specific time period.

Total revenue 12,800.00

Total fixed costs 2,400.00
Total variable costs 6,400.00
Number of products 8,000

Calculate:
1. The gross margin per unit,
2. The break-even point by quantity,
3. The break-even point by value,
4. The break-even point as a percentage of production,
5. The boundary values for price, variable cost, fixed costs and volume of production,
6. The margin of safety by quantity, value and percent,
7. The operating leverage level.
Solution:
Questions Results
Volume of sales
Price
Variable costs per unit
Gross margin per unit (1.)
Total gross margin
Total fixed costs
Operating profit
Break-even point by quantity (2.)
Break-even point by value (3.)
Break-even point as a percentage of planned production (4.)
The boundary values for (5.):
- price,
- variable cost,
- fixed costs,
- volume of production.
The margin of safety by (6.):
- quantity,
- value
- percent.
The operating leverage level.

Task 4.
Problem:
A company produces one assortment of products. They gained the following revenue and incurred the
following costs during specific time period.

Total revenue 13,000.00

Total costs of direct raw materials 6,800.00
Total administrative costs of materials 400.00
Total administrative labour costs 1,200.00
Total administrative costs of energy 600.00
Total costs of direct labour 1,200.00
Depreciation 800.00
Number of products 1,000
Calculate:
1. The break-even point as a percentage of production,
 2. The margin of safety by percent,
3. The profit multipliers for the all individuals, creating the operating profit,
4. The change of the operating profit, caused by the increase of all individuals by 10%,
5. The change of the operating profit, caused by the decrease of all individuals by 10%,
6. The operating leverage level,
7. The change of the operating profit, caused by the increase of sales by 10%.
Solution:
Questions Results
Total revenue
Price
Total variable costs
Veriable cost per unit
Gross margin per unit
Total gross margin
Total fixed costs
Fixed cost per unit
Operating profit
Operating profit per unit
Break-even point as a percentage of the volume
of production (1.)
Margin of safety by percent (2.)
The profit multipliers (3.):
- price,
- costs of direct raw materials,
- administrative costs of materials,
- administrative labour costs,
- administrative costs of energy,
- costs of direct labour,
- depreciation.
The change of the operating profit, caused by….. (4.)
The change of the operating profit, caused by….. (5.)
The operating leverage level (6.)
The change of the operating profit, caused by…. (7.)