Cost object - an entity to which cost is

assigned

Main
Production
department

Belt repairs work

shop

Activity or cost driver

No. of units
produced and
sold

No. of belts
repaired

Per unit selling price

Sales revenue
Time allocation of G.M. Production
No. of hrs. per month for GM Production
Head count
Compressed air consumed
NATURE OF EXPENSES
Raw material consumed
Wages
Power
Depreciation
Total Direct costs
Salaries of management staff
Travel and entertainment
Advertising and sales promotion
G.M. Production's cost
Compressed air cost
Belts repairs cost
Total costs
Total costs allocated
Total Per unit cost (fixed and variable)
Sales commission to sales staff

Compressed
air
department

Cubic feet (cu

ft.) of
compressed
air produced
72
150,000

100,000
75
7,500,000
70%

25%

5%

200
125,000

10
25,000

12

200,000
50,000
40,000
35,000
325,000

1,750
3,000
25,000
15,000
44,750

8,000
25,000
35,000
20,000
88,000

114,550
18,485 177,785
133,035
177,785
2,469

320,740
92,425
177,785 590,950
915,950
9.1595
1.50%

General
Manager
Production

Total
Production

Finance,
Accounts,
CEO and
Corporate & secretariat
legal

Human
Resource

Total other
than
production

No. of units
Number of Per rupee of Per rupee of
sold or Sales
head count turnover
turnover
revenue

Time
allocation

-100%
200
1

Sales and
Marketing

223

15

15

38

1,200
2,000
5,000
8,200

209,750
79,200
102,000
75,000
465,950

5,000
3,000
6,000
14,000

2,000
2,000
5,000
9,000

5,000
2,500
3,500
11,000

1,000
1,500
2,000
4,500

13,000
9,000
16,500
38,500

22,910 110,910

400,000
50,000
458,200

400,000
50,000

500,000
100,000
150,000

200,000
25,000
-

300,000
35,000
-

800,000
250,000
-

22,910
110,910
0.7394

450,000
458,200
4.582

450,000
915,950

1,800,000
410,000
150,000
-

750,000
764,000

225,000
234,000

335,000
346,000

1,050,000
1,054,500

2,360,000
2,398,500

915,950

112,500
876,500

234,000

346,000

1,054,500

112,500
2,511,000

Cost objects
Production department
Belts repairs work shop
Compressed air department

Activity /
cost driver
Direct costs
Indirect costs
Total costs
325,000
590,950
915,950 No. of units
No. of belts
44,750
133,035
177,785
repaired
88,000
22,910
110,910 Cu. Ft of air

Per unit cost

9.1595
2,469 Direct material
0.7394 Direct labour

G.M. Production

458,200

458,200 No. of hours

## Sales and Marketing

876,500

876,500 No. of units

Human Resource

234,000

Finance, Accounts, Corporate & legal

346,000

1,054,500

CEO and secretariat

3,426,950
Less: Costs allocated

Cost objects
Production department
Belts repairs work shop
Compressed air department
G.M. Production
Sales and Marketing
Human Resource
Finance, Accounts, Corporate & legal
CEO and secretariat
Less: Costs allocated

746,895
-

Fixed costs
Variable costs
Total costs
355,740
560,210
915,950
129,550
48,235
177,785
42,910
68,000
110,910
458,200
458,200
764,000
112,500
876,500
234,000
234,000
346,000
346,000
1,054,500
1,054,500
3,384,900
788,945
4,173,845
459,400 287,495 746,895
2,925,500
501,450
3,426,950

200,000
50,000
250,000

8.765 Manufacturing over heads

Per head
count
Per rupee of
346,000
turnover
Per rupee of
1,054,500
turnover
4,173,845
746,895
3,426,950
234,000

2,291 Prime cost

Product cost

896.55 Indirect material

5% In direct labour
14% Over heads

Period costs
Salaries and wages
Power
Depreciation
Travel and entertainment

9,750

Advertising and sales promotion

29,200
627,000
665,950
915,950
Nature of expense wise break up

Sales
Product cost
Gross profit
SGA
Profit before tax

7,500,000
915,950
6,584,050
2,511,000
4,073,050
-

Raw material consumed

Other material consumed
Salaries and wages
Power
54.3% Depreciation
Travel and entertainment

Assumptions
1 No opening and closing inventory of raw material, work-in-process and finished goods
2 Costs of indirect functions such as HR, Finance and CEO are not allocated to each other.
3 Depreciation is on the basis of useful life and not on the basis of unit of output method hence a fixed c

Total
Company

Fixed Costs

Variable costs

261

209,750
92,200
111,000
91,500
504,450

13,000
11,000
91,500
115,500

209,750
79,200
100,000

2,200,000
460,000
150,000
2,810,000
3,314,450

2,200,000
460,000
150,000
2,810,000
2,925,500

388,950

112,500
3,426,950

2,925,500

112,500
501,450

388,950

nd wages

1,925,500
9,000
16,500

d entertainment

410,000

ng and sales promotion

150,000
2,511,000

expense wise break up of product cost

erial consumed
terial consumed
nd wages

d entertainment

d goods
ch other.
t method hence a fixed cost.

200,000
9,750
479,200
102,000
75,000
50,000
915,950