Cost Accounting Semester 6 PDF

faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Chapter 1 : Cost Behavior Analysis After studying this chapter, you should be able to: 1. Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs. 2. Understand cost classifications used in making decisions. 3. Definition of variable costs, fixed costs, and mixed costs. 4. Example Definition of cost behavior : Cost behavior is the resulting change in the behavior of cost or expenses of a business due to a change in the business process. The importance of cost behavior analysis: 1. It is very necessary in decision making. 2. It is very necessary in planning and controlling. Types of cost behavior patterns: There are three cost behavior patterns: 1. Variable cost 2. Fixed cost. 3. Mixed or semi variable cost which contain both variable and fixed cost elements. Cost Analysis Estimation Methods: high – low method: in this method the mixed cost can divided in to variable and fixed by following these steps: I. identify the high level of activity and its cost. II. identify the low level of activity and its cost. III. calculate the variable cost per unit by using this equation : variable cost per-rate- unit = high cost – low cost high level of activity – low level of activity calculate the fixed cost by using this equation : Y=a+ b x Y: mixed cost a: fixed cost b:variable cost per unit X : level of activity This equation should be applied either on high level or on low level of activity. Example: Assume that the Maintenance cost of And the Direct labor hrs. as follows: company A was shown as follows: Required: Use the high – low method , determine the variable and fixed cost elements of the maintenance. Solution: 1. variable cost per direct labor hour: variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 1000 -700 = 300 8000-5000 3000 = 0.10 SDG per direct labor hour. 2. fixed cost : y = a +b x 1000 = a + 0.10 *8000 a= 1000-800 = 200 SDG faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Chapter 1 : Cost Behavior Analysis Lecture : 2 Example : 1 Month unit cost January 4 2200 February 7 3100 March 5 2600 April 2 1500 May 3 2200 June 6 3000 July 8 3600 Required: Using the high-low method, estimate the variable and fixed cost of the cost formula for Golden company’s costs variable cost per-rate- unit = high cost – low cost high level of activity – low level of activity calculate the fixed cost by using this equation : Y=a+ b x Y: mixed cost a: fixed cost b:variable cost per unit X : level of activity Solution: 1. variable cost per direct labor hour: variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 3600 - 1500 = 2100 8-2 6 = 350 SDG per direct labor hour. 2. fixed cost : y = a +b x 3600 = a + 350 *8 a= 3600 - 2800 = 800 SDG Example : 1 Month Number patients Admitting Admitted Department cost May 1800 14700 June 1900 15200 July 1700 13700 August 1600 14000 September 1500 14300 October 1300 13100 November 1100 12800 December 1500 14600 Required: Using the high-low method, estimate the fixed cost and variable components of Admitting cost Solution: 1. variable cost per direct labor hour: variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 15200 - 12800 = 2400 1900 - 1100 800 = 3 SDG per direct labor hour. 2. fixed cost : y = a +b x 15200 = a + 3 *1900 a= 15200 - 5700= 9500 SDG Exercise : 1 The number of X-rays taken and X-ray costs over the last nine months in Beverly Hospital are given below: Month X - Rays Taken X- Rays cost January 6250 28000 $ February 7000 29000 $ March 5000 23000 $ April 4250 20000 $ May 4500 22000 $ June 3000 17000 $ July 3750 18000 $ August 5500 24000 $ September 5750 26000 $ Required: Using the high-low method, estimate the cost formula for X-ray costs Exercise : 2 Hotel Vail has accumulated records of the total electrical costs of the hotel and the number of occupancy-days peaks occurring during the ski season and in the summer. Month Occupancy Days Electrical Costs January 2604 6257 February 2856 6550 March 3534 7986 April 1440 4022 Required: May 540 2289 Using the high-low method, estimate the fixed cost of June 1116 3591 electricity per month and the variable cost of electricity per occupancy-day. Round off the fixed cost to the nearest July 3162 7264 whole dollar and the variable cost to the nearest whole August 3608 8111 cent. September 1260 3707 October 186 1712 November 1080 3321 December 2046 5196 faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 b- The least squares method: -the least squares method is based on computations that find their foundation in the equation for straight line. - straight line can be expressed in equation form: Y=a +b X -from this basic equation ,and a given set of observations two linear equations can be developed as follows: Sum XY=a sum X+ b sumX2……………..(1) Sum Y= n a + b sum X………………………(2) X : activity measure ( hrs , quantity of production, etc ) Y= total mixed cost observed. a : fixed cost b: variable cost n:number of observations. Example: Assume that power cost for the (A) company have been observed as follow: Required : Use the least squares method , determine the variable and fixed cost elements of power. -substituting these amounts in the two linear equations giver earlier , we will have: 348700=116a++1158b……………(1) 35300=12a+116b…………………..(2) To solve the equation we must eliminate either a or b. -we can eliminate the a term by multiplying equation (1) by 12 and equation(2) by 116 as shown bellow : 4184400=1392a+13896b……..(3) 4094800=1392a+13456b……..(4) -subtract 4 from 3 89600=440b b=89600/440 = 203.64= variable cost of power per machine hour. -to identify the fixed cost for power we use equation two: 35300=12a+ 116 b………(2) 35300=12a+116 (203.64) 35300=12a+23622.24 a= 11677.76/12=973.15=fixed cost per power faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 The least squares method: The least squares method is based on computations that find their foundation in the equation for straight line. straight line can be expressed in equation form: Y=a +b X from this basic equation ,and a given set of observations two linear equations can be developed as follows: Sum XY=a sum X+ b sumX2……………..(1) Sum Y= n a + b sum X………………………(2) X : activity measure ( hrs , quantity of production, etc ) Y= total mixed cost observed. a : fixed cost b: variable cost n:number of observations. Example: Assume that power cost for the (A) company have been observed as follow: Required : Use the least squares method , determine the variable and fixed cost elements of power. Sum xy 348700 substituting these amounts in the two linear equations giver earlier , we will have: 348700=116a+1158b……………(1) 35300=12a+116b…………………..(2) To solve the equation we must eliminate either a or b. we can eliminate the a term by multiplying equation (1) by 12 and equation(2) by 116 as shown bellow : 4184400=1392a+13896b……..(3) 4094800=1392a+13456b……..(4) -subtract 4 from 3 89600=440b b=89600/440 = 203.64= variable cost of power per machine hour. To identify the fixed cost for power we use equation two: 35300=12a+ 116 b………(2) 35300=12a+116 (203.64) 35300=12a+23622.24 a= 11677.76/12=973.15=fixed cost per power Lecture 4 Exercises : 1 Materials Number of Month Handling Cost Moves January $2,000 100 February 3,090 125 March 2,780 175 April 1,990 200 Required: May 7,500 500 Using the high-low method, estimate the variable and June 5,300 300 fixed cost. July 4,300 250 August 6,300 400 September 5,600 475 October 6,240 425 Exercises : 2 The following data was gathered for five production runs of ABC Company. Determine the cost function using the least squares method Batch Units (x) Total Cost (y) 1 680 $29,800 2 820 $34,000 3 570 $27,500 4 660 $29,000 5 750 $31,900 faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 By the end of this chapter, students should be able to: 1. Definition of cost accounting. 2. Explain the objectives of cost accounting. 3. Understand the Classification On basis of 4. Set plans for operations activities in the short and long terms. 5. Compute and use the break-even points and its applications. Meaning of cost Accounting Cost Accounting is concerned with recording, classifying and summarizing costs for determination of costs of products or services ;planning, controlling and reducing such costs and furnishing information to management for decision making Cost Accounting can be defined as the expenditure incurred on or attributable to a given thing. In other words, cost is the amount of resources used for something which must be measured in terms of money. Objectives of Cost Accounting can be summarized as under: 1. To ascertain the cost of production on per unit basis, for example, cost per kg, cost per meter, cost per liter, cost per …. 2. Cost accounting helps in the determination of selling price. Cost accounting enables to determine the cost of production on a scientific basis and it helps to fix the selling price. 3. Cost accounting helps in cost control and cost reduction 4. Ascertainment of division wise, activity wise and unit wise profitability becomes possible through cost accounting. 5. Cost accounting also helps in locating wastages. 6. Cost accounting helps in presentation of relevant data to the management which helps in decision making. Decision making is one of the important functions of Management and it requires presentation of relevant data. faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 COST ACCOUNTING CONCEPTS 1. variable cost: Is that cost which is: change in total in direct proportion to a change in the level of activity and the cost per unit is fixed. 2. fixed cost : Is that cost which is remains unchanged in total when the level of activity change and the cost per unit is variable. 3. direct cost: Is that cost which is related directly to a cost object. cost object is any item for which the manager whishes to measure cost. 4. indirect cost: Is that cost which is not related directly to a cost object. cost object is any item for which the manager whishes to measure cost. 5.Controllable cost: Controllable cost is that cost which a manager can control or heavily influence the level of cost 6.uncontrollable cost: uncontrollable cost is that cost which a manager cannot control or cannot influence significantly 7. manufacturing cost: manufacturing cost is that cost which is used in producing goods and services. faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Costs Terms, Concepts and Classifications MANUFACTURING COSTS Direct Direct Manufacturing Materials Labor Overhead The Product Manufacturing costs are usually grouped into three main categories: direct materials, direct labor, and manufacturing overhead. These costs are incurred to make a product. DIRECT LABOR Those labor costs that can be easily traced to individual units of product. Example: Wages paid to automobile assembly workers direct labor consists of that portion of labor cost that can be easily traced to a product. Direct labor is sometimes referred to as touch labor. MANUFACTURING OVERHEAD Manufacturing costs that cannot be traced directly to specific units produced. Examples: Indirect labor and indirect materials Wages paid to employees who are Materials used to support the not directly involved in production production process. work. Examples: maintenance workers, Examples: lubricants and cleaning janitors and security guards. supplies used in the automobile assembly plant. manufacturing overhead consists of all manufacturing cost other than direct materials and direct labor. These costs cannot be easily traced to products. These costs are also called indirect manufacturing cost, factory overhead, and factory burden.(Fixed or variable manufacturing OH). faculty of Business Administration ‫ميحرلا نمحرلا هللا‬ ‫بسم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Break even point analysis Chapter 2: Break even point analysis After studying this chapter, you should be able to: 1. Understand the Break even point analysis. 2. Explain break even point analysis and give examples of its importance. 3. Discuss how to calculate break even and explain the methods. 4. Understand the concept and Calculations of Contribution Margin 5.Calculations the Break even point (Quantity ) 6.Calculations the Break even point (value) Break Even point Analysis is a method for identification the relationship between costs and volume of output and profit The point where the sales, revenue equals total cost and there is neither profit nor loss. Breakeven point is the point at which total revenue equals total costs. Classification of costs: Fixed costs 1. Wages of permanent workers 2. Salaries of administrative staff 3. Rent 4. Insurance 5. Interest on term loans 6. Maintenance expenses 7. Travel expenses 8. Telephone expenses Classification of costs :Variable Costs 1.Raw Material 2. Consumables 3.Power and Fuel 4. Inward Carriage 5.Packing material 6. Interest on working Capital 7.Direct Labour These are also called as “Marginal Costs” Semi-variable costs Semi variable costs are costs made up of fixed element and a variable element. Every product made has a variable cost and a selling price Contribution Margin The difference between the selling price per unit and the variable cost per unit is known as the CONTRIBUTION towards covering the business’s fixed costs. Break-even point ( Quantity ) = Fixed costs Selling price per unit – Variable costs per unit Break-even point ( Quantity ) = Fixed costs Contribution Margin Break-even point (value ) = Break-even point ( Quantity ) * Selling price per unit Example :1 Calculate break even point in Quantity and value from the following information using equation Method Selling price per unit 250 $ Variable cost per unit 200 $ Total fixed cost 10000 $ Break-even point ( Quantity ) = Fixed costs Selling price per unit – Variable costs per unit Break-even point ( Quantity ) = 10000 250– 200 = 10000 50 Break-even point ( Quantity ) =200 Break-even point (value ) = Break-even point ( Quantity ) * Selling price per unit Break-even point (value ) =200 *250 =50000 Example :2 Calculate break even point in Quantity from the following information using equation Method Contribution Margin 3000 $ Total fixed cost 45000  Break-even point ( Quantity ) = Fixed costs Contribution Margin Break-even point ( Quantity ) = 45000 3000 Break-even point ( Quantity ) =15 Calculate the break even point. Time: 10 mins an 5 mins discussion Exercises :1 A company has fixed cost 50000 RS and variable cost 8 RS the selling price per unit 10 RS what is the break even point quantity and break even point in value Exercises : 2 Calculate break even point in Quantity and value from the following information using equation Method Selling price per unit 300 $ Variable cost per unit 150 $ Total fixed cost 600 $ faculty of Business Administration ‫ميحرلا نمحرلا هللا‬ ‫بسم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Exercises Time: 10 minutes an 5 minutes discussion Exercises :1 Month Machine-Hours Total Overhead Cost March 50000 194000 $ April 40000 170200 $ May 60000 217800 $ June 70000 241600 $ Required: Use the high – low method , determine the variable and fixed cost elements of the maintenance. Solution: 1. variable cost per-rate : variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 241600-170200 = 71400 70000-40000 30000 = 2.38 $ per direct labor hour. 2. fixed cost : y = a +b x 241600 = a +2.38 *70000 241600 = a + 166600 a= 241600 -166600 = 75000 $ Exercises :2 using Least Square Method Fit the straight line to the following data determine the variable and fixed cost. x 1 2 3 4 5 y 1 2 3 4 5 x y x2 xy 1 1 1 1 2 2 4 4 3 3 9 9 4 4 16 16 5 5 25 25 Σx = 15 Σy = 15 Σx2 = 55 Σxy = 55 Sum XY=a sum X+ b sumX2……………..(1) Sum Y= n a + b sum X………………………(2) X : activity measure ( hrs , quantity of production, etc ) Exercises :3 Calculate break even point in Quantity and value from the following information using equation Method Selling price per unit 350 $ Variable cost per unit 300$ Total fixed cost 350000$ Break-even point ( Quantity ) = Fixed costs Selling price per unit – Variable costs per unit Break-even point ( Quantity ) = 350000 350– 300 = 350000 50 Break-even point ( Quantity ) = 7000 units The number unit we need to sell to break even point Break-even point (value ) = Break-even point ( Quantity ) * Selling price per unit Break-even point (value ) =7000 *350 = 2450000 $ Exercises :4 Draw a circle around the number of correct answer(MCQs ) 1. Which of the following are characteristics of break even point (B.E.P)? a) There is no loss and no profit to the firm. b) Total revenue is equal to total cost. c) Contribution is equal to fixed cost. d) All of the above. 2. Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs 5,000. What is break-even point in Quantity ? a) 500 units b) 1,000 units c) 1,250 units d) None of the above 3. Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is a) Rs 1.25 per unit b) Rs 4 per unit c) Rs 0.8 per unit d) None of the above Answer 1 2 3 D C B Exercises :5 Calculate break even point in Quantity from the following information using equation Method Contribution Margin 2000$ Total fixed cost 46000  Break-even point ( Quantity ) = Fixed costs Contribution Margin Break-even point ( Quantity ) = 46000 2000 Break-even point ( Quantity ) = 23 units faculty of Business Administration ‫ميحرلا نمحرلا هللا‬ ‫بسم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Chapter 3 Cost-volume Profit (CVP) Analysis and Break-Even Point After studying this chapter, you should be able to: 1. Describe the relationship between sales volume, costs and profit. 3. Explain the concept of a Break-Even Point. 4. Calculate the Margin of safety 5. Calculate break-even points with target profit and margin of safety. Introduction: CVP analysis looks at the effect of sales volume variations on costs and operating profit. The analysis is based on the classification of variable expenses or fixed expenses. Example : Sales price per unit 100 $ Variable cost per unit 60 $ contribution Margin 40 $ fixed cost 25000 $ Target profit 20000 $ Calculate the volume of sales to achieve target profit. volume of sales to achieve target profit = fixed cost + target profit contribution Margin = 25000 +20000 = 45000 40 40 = 1125 units volume of sales to achieve target profit = fixed cost + target profit Selling price per unit – Variable costs per unit Example : Calculate the volume of sales to achieve target profit from the following information using equation Method Selling price per unit 200$ Variable cost per unit 160$ Total fixed cost 60000 $ target profit 10000 $ volume of sales to achieve target profit = 60000+ 10000 = 1750 units 200– 160 Margin of safety-a measure in which the budgeted volume of sales is compared with the volume of sales required to break even. Fixed Costs *Contribution per unit *Contribution per unit = Selling Price per unit – Variable Cost per unit Margin of Safety = Budgeted Sales – Breakeven point Margin of Safety  The difference between budgeted or actual sales and the breakeven point  The margin of safety may be expressed in units or revenue terms Example : Using the following data, calculate the breakeven point and margin of safety in units: Selling Price = 50 $ Variable Cost = 40 $ Fixed Cost = 70000 $ Budgeted Sales = 7500 units 1. Contribution = 50 - 40 = 10 per unit 2. Breakeven point = 70,000/10 = 7000 units 3. Margin of safety = 7500 – 7000 = 500 units faculty of Business Administration ‫ميحرلا نمحرلا هللا‬ ‫بسم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Chapter 3. Cost-volume Profit (CVP) Analysis and Break-Even Point Example :1 Sales price per unit 50 $ Variable cost per unit 10 $ contribution Margin 40 $ fixed cost 1000 $ Target profit 3000 $ Calculate the volume of sales to achieve target profit. volume of sales to achieve target profit = fixed cost + target profit contribution Margin = 1000 +3000 = 4000 40 40 = 100 units volume of sales to achieve target profit = fixed cost + target profit Selling price per unit – Variable costs per unit Example :2 Calculate the volume of sales to achieve target profit from the following information using equation Method Contribution per unit 200$ fixed cost 80000 $ target profit 100000 $ volume of sales to achieve target profit = 80000+ 100000 200 = 180000 = 900 units 200 Example :3 Using the following data, calculate the volume of sales to achieve target profit of 10000 $ Selling Price = 35 $ Variable Cost = 20 $ Fixed Costs = 50000 $ volume of sales to achieve target profit = fixed cost + target profit contribution Margin Contribution = 35 – 20 = 15 = 50000 +10000 = 60000 15 15 = 4000 units faculty of Business Administration ‫ميحرلا نمحرلا هللا‬ ‫بسم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Exercises Time: 10 minutes an 5 minutes discussion Exercises :1 Activity level (units) 6500 6000 7500 Total cost $50800 $50000 $54800 Required: Use the high – low method , determine the variable and fixed cost elements of the maintenance. Solution: 1. variable cost per-rate : variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 54800 -50000 = 4800 7500-6000 1500 = 3.2 $ per direct labor hour. 2. fixed cost : y = a +b x 54800 = a + 3.2*7500 54800 = a + 24000 a= 54800 - 24000 = 30800 $ Exercises :2 week Unit produced Total cost 1 5 20000 2 9 27000 3 4 17000 4 7 19000 5 6 23000 Required: Use the high – low method , determine the variable and fixed cost elements of the maintenance. Solution: 1. variable cost per-rate : variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 27000 -17000 = 10000 9-4 5 = 2000 $ per direct labor hour. 2. fixed cost : y = a +b x 27000 = a + 2000*9 27000= a + 18000 a= 27000- 18000= 9000 $ Exercises :3 using Least Square Method Fit the straight line to the following data determine the variable and fixed cost. x 1 2 3 4 5 y 1 2 3 4 5 x y x2 xy 1 1 1 1 2 2 4 4 3 3 9 9 4 4 16 16 5 5 25 25 Σx = 15 Σy = 15 Σx2 = 55 Σxy = 55 Sum XY=a sum X+ b sumX2……………..(1) Sum Y= n a + b sum X………………………(2) X : activity measure ( hrs , quantity of production, etc ) 55=15 a +55 b ……………..(1) 15= 5a + 15 b ………………………(2) To solve the equation we must eliminate either a or b. -we can eliminate the a term by multiplying equation (1) by 1 and equation(2) by 3 as shown bellow : 55=15 a +55 b ……………..(3) 45= 15a + 45b ………………………(4) subtract 4 from 3 ……………………………………………………………………………………………… ……………………………………………………………………………………………… …………………………………………………………………………………………… Exercises :4 Calculate break even point in Quantity and value from the following information using equation Method Selling price per unit 350 $ Variable cost per unit 300$ Total fixed cost 350000$ Break-even point ( Quantity ) = Fixed costs Selling price per unit – Variable costs per unit Break-even point ( Quantity ) = 350000 350– 300 = 350000 50 Break-even point ( Quantity ) = 7000 units The number unit we need to sell to break even point Break-even point (value ) = Break-even point ( Quantity ) * Selling price per unit Break-even point (value ) =7000 *350 = 2450000 $ Exercises :5 Calculate break even point in Quantity from the following information using equation Method Contribution Margin 2000$ Total fixed cost 46000  Break-even point ( Quantity ) = Fixed costs Contribution Margin Break-even point ( Quantity ) = 46000 2000 Break-even point ( Quantity ) = 23 units faculty of Business Administration ‫بسم هللا الرحمن الرحيم‬ Welcome Cost Accounting Semester 6 Prepared by : Dr / Sherien Mamoun SayedAhmed Associate professor in Accounting 2024-2025 Exercises Time: 10 minutes an 5 minutes discussion Exercises :1 Month Machine-Hours Total Overhead Cost March 50000 194000 $ April 40000 170200 $ May 60000 217800 $ June 70000 241600 $ Required: Use the high – low method , determine the variable and fixed cost elements of the maintenance. Solution: 1. variable cost per-rate : variable cost per-rate- unit ( b)= high cost – low cost high level of activity – low level of activity = 241600-170200 = 71400 70000-40000 30000 = 2.38 $ per direct labor hour. 2. fixed cost : y = a +b x 241600 = a +2.38 *70000 241600 = a + 166600 a= 241600 -166600 = 75000 $ Exercises :2 using Least Square Method Fit the straight line to the following data determine the variable and fixed cost. x 1 2 3 4 5 y 1 2 3 4 5 x y x2 xy 1 1 1 1 2 2 4 4 3 3 9 9 4 4 16 16 5 5 25 25 Σx = 15 Σy = 15 Σx2 = 55 Σxy = 55 Sum XY=a sum X+ b sumX2……………..(1) Sum Y= n a + b sum X………………………(2) X : activity measure ( hrs , quantity of production, etc ) Exercises :3 Calculate break even point in Quantity and value from the following information using equation Method Selling price per unit 350 $ Variable cost per unit 300$ Total fixed cost 350000$ Break-even point ( Quantity ) = Fixed costs Selling price per unit – Variable costs per unit Break-even point ( Quantity ) = 350000 350– 300 = 350000 50 Break-even point ( Quantity ) = 7000 units The number unit we need to sell to break even point Break-even point (value ) = Break-even point ( Quantity ) * Selling price per unit Break-even point (value ) =7000 *350 = 2450000 $ Exercises :4 1. Given selling price is Rs 10 per unit, variable cost is Rs 6 per unit and fixed cost is Rs 5,000. What is break-even point in Quantity ? a) 500 units b) 1,000 units c) 1,250 units d) None of the above 3. Given selling price is Rs 20 per unit, variable cost is Rs 16 per unit contribution is a) Rs 1.25 per unit b) Rs 4 per unit c) Rs 0.8 per unit d) None of the above Answer 1 2 C B Exercises :5 Calculate break even point in Quantity from the following information using equation Method Contribution Margin 2000$ Total fixed cost 46000 Break-even point ( Quantity ) = Fixed costs Contribution Margin Break-even point ( Quantity ) = 46000 2000 Break-even point ( Quantity ) = 23 units

Cost Accounting Semester 6 PDF

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