Question

The table below has the costs for a specific period: Cost Item Direct labour Direct material Advertising Factory supervision Sales commissions Depreciation administrative office equipment Indirect materials, factory Depreciation factory building Administrative office suppies Amount $90.000 $80.000 $40.000 $50.000 $60,000 $5,000 $7,000 $10,000 $3.000 Cequired: (a) What is the total period cost? (2 marks) Click or tap here to enter text (b) What is the total direct product cost? (2 marks) Hickor tap here to enter text (c) What is the total indirect product cost? (2 marks) Cick or tap here to enter text. (d) From the cost items listed in the table above, list one indirect product cost which varies with the level of output (2 marks) Cick or tap here to enter text. (e) Under variable costing, what is the average unit product cost for the specific period? Consider that during this specific period 1.000 units of only one type of product were manufactured 12 marks] Cick or tap here to enter text. Page 10 of 12 GUACC835 Cost and Management Accounting Semester 12020 ( Under absorption costing, what is the average unit product cost for the specific period? Consider that during this specific period 1,000 units of only one type of product were manufactured (2 marks) Cick or tap here to enter text. (g) What is the underlying difference and implication between variable and absorption costing product per unit? (4 marks) Hick or tap here to enter text Or you can use the given excel document to show your work for Question 6)

Answer 1

Variable Cost statement
Particulars	Amount
Variable Cost
Direct materials	80000
Direct Labour	90000
Total	170000
SemiFixed Costs
Factory Supervision	50000
Indirect material Factory	7000
Depreciation Factory building	10000
Direct Product cost	237000	b
Other Fixed costs
Administrative Office supplies	3000
Depreciation Administrative Office equipment	5000
Indirect Production cost	245000	c
Selling cost
Advertisement	40000
Sales Commission	60000
Total Cost	345000	a

a	Total Period Cost	345000
b	Total direct product cost	237000
c	Total indirect product cost	245000
d	Administrative office supplies
e	Average Unit product cost under variable costing for the period considering output as 1000	170

f

Average Unit product cost under absorption costing for the period considering output as 1000

245

g. Under Variable costing product cost consists of only variable cost. In this question, only Direct material and direct labour are considered as variable costs. Under variable costing contribution, (that is sales -variable cost ) is considered for decision making. All other costs are recovered from contribution. Under absorption costing, the cost of production, that is, cost including expenses under administrative overhead is considered as product cost. in this question, the indirect production cost is the production cost. Under absorption costing the decision is based on the total cost of production and not on any individual component.