Question

Make a business analysis of the production/manufacturing company which producing on a

job order costing, with hypothetically created data. The reporting period is monthly. All data

which was hypothesized cannot be zero. Business analysis during the month through the

stages of completion as follows :

1. Determine in the beginning period: raw materials, work in process and finished goods *)

2. Determine in the ending period: raw materials, work in process and finished goods *)

3. Determine the purchase of raw materials (only direct material) for a month *)

4. a. Determine direct labor hours *)

b. Determine direct labor wage rate per hour *)

c. Calculate total direct labor wage.

5. Determine actual manufacturing overhead *)

6. Calculating POHR (the allocation base is a direct labor hours) :

a. Determine total manufacturing overhead costs estimated for the month *)

b. Determine the total allocation base estimated for the month *)

d. Calculate POHR

7. a. Compute the amount of total manufacturing overhead applied for the month.

b. What is the underapplied or overapplied overhead cost for the month ?

8. Using absorption costing system :

a. Calculate COGM

b. Calculate COGS unadjusted and adjusted

c. Determine total sales *)

d. Determine selling expenses *)

e. Determine administrative expenses *)

f. Create an absorption format income statement for the month

9. Using variable costing system. The original data from no. 7 and 8 :

a. Assume that variable manufacturing overhead applied : fixed manufacturing overhead

applied = 60% : 40%.

Calculate variable manufacturing overhead applied and fixed manufacturing overhead

applied

b. Calculate variable COGM

c. Calculate variable COGS unadjusted and adjusted (all underapplied or overapplied

overhead cost in no. 7 b as you computed is adjusted to COGS here)

d. Assume that variable selling expenses: fixed selling expenses = 30% : 70%.

Calculate variable selling expenses and fixed selling expenses

e. Assume that variable administrative expenses : fixed administrative expenses = 50%:

50%.

Calculate variable administrative expenses and fixed administrative expenses

f. Create a contribution format income statement for the month (the total sales as same as

no. 8 c.)

10. Calculate CM Ratio

11. Calculate the break even point (BEP) in rupiah or other currency.

12. Calculate the margin of safety (MOS) in rupiah or other currency and in %.

13. a. Calculate degree of operating leverage (DOL).

b. If sales increase by 10% next month, what percentage increase in net operating income?

14. The sales manager is convinced that a 10 % increase in advertising (fixed selling expense)

and 5 % decrease in variable selling expense, would increase monthly sales by 20 % next

month. Prepare two contribution format income statements, one showing the results of

the month’s operations and one showing the next month. Would you recommend that the

company do as the sales manager suggests?

Note : *) data created hypothetically by yourself