Principles of Accounts

Form 5
Work Sheet #1 - Costing Principles

The Jade Store makes and sells various high-end jewelry. Materials includes gemstones and precious metals.
Each item passes through at least two of four departments.
Costs incurred are as follows:
Material Type Cost Price Packaging
0.05mm Crystals $4 6 x 6 Gift boxes $10 each
0.25mm Crystals $15 3 x 3 Gift boxes $5
0.25mm Jade $25 Labour
0.50mm Jade $50 Polishing and Finishing - $15 per hour
Gold links per inch $12 Assembly - $45 per hour
White gold links per inch $19 Packaging - $10 per hour
Silver links per inch $8 Casting - $50 per hour

Cost-Plus Pricing
In each question, calculate the selling price of the product.

1. Product #325 - Cross My Heart Pendants and Necklace.

Product #325 uses twenty-three 0.05mm white crystals each and one 0.25mm jade stone. This
product also comes with an 18” gold chain costing and is packaged in a
6 x 6 gift box.

Labour hours are: 3 hours casting, 2 hours assembly, 1 hour polishing and 0.5 hours packaging.

Indirect costs on this product is $135 and Mark-up is 50%.

2. Product #762 – Friendship Bracelet

Product #762 uses thirteen 0.25 crystals, set in a white gold 12” bracelet and packaged in a 3 x 3 gift
box costing.

Labour hours are: 1 hour casting, 1 hour assembly, 2 hours polishing and 0.5 hours packaging.

Indirect cost is $105 and Mark-up is 65%.

3. Product #117 – Tranquility

Product #117 is a 16” silver chain with a pendant containing a 0.50mm jade stone and twelve
0.05mm crystals, packaged in a 6 x 6 gift box.

Labour hours are: casting 2 hours, assembly 1.5 hours, polishing 2 hours, packaging 0.5 hours.

Indirect costs are $85 and Mark-up is 45%.

Absorption Costing
Calculate the selling price for each item.
Indirect Costs for Casting and Assembly cost centers are as follows:
Allocated Costs Casting Assembly Casting Assembly
$ $
Supervisor’s Salary 6 000 2 500 Labour 1 500 500
Depreciation on Machinery 1 200 1 800 hours
Apportioned Costs Basis of Apportionment
Rent $20 000 12 000 sq m 13 000 sq m Machine 3 500 4 500
Electricity $10 500 60 000 kilowatt 40 000 kilowatt hours
hrs hrs

4. Product #289 – Rock of Ages

Product #289 uses four 0.50mm jade stones and twenty 0.05mm crystals, set in a 16” white gold
chain, and packed in a 6 x 6 gift box.

Labour hours are: 4 hours casting, 3 hours assembly, 2 hours polishing and 0.5 hours packaging.
Machine hours are 8 hours in casting and 4 hours in assembly. Mark -up is 75%.

5. Product #654 – Back to Basics

Product #654 uses sixteen 0.25mm crystals, set in a 10” silver bracelet and packaged in a 3 x 3 gift
box.

Labour hours are: 2 hours casting, 1.5 hours assembly, 0.5 hours polishing and 0.5 hours packaging.
Machine hours are: 3 hours casting and 5 hours assembly. Mark-up is 50%.

Indirect costs for Polishing and Packaging Cost Centers are as follows:
Allocated Costs Polishing Packaging Polishing Packaging
$ $
Supervisor’s Salary 4 000 3 500 Labour 300 900
Repairs to Machines 1 200 1 800 Hours
Apportioned Costs Basis of Apportionment Machine 1 200 800
Insurance $70 000 $140 000 Hours
$1 000 machine value machine value

6. Product #42 – Grace

Product # 42 uses one 0.50mm jade stone, set in an 18” gold chain and package in a
6 x 6 gift box.

Labour hours are: 1 hour casting, 2 hours assembly, 2 hours polishing and 0.5 hours packaging.
Machine hours are: 3 hours polishing and 4 hours packaging. Mark-up is 40%.