Accounting: Calculation of Operating Cost, Profit and Selling Price

This article explains how to calculate operating cost, profit and selling price in accounting with solved examples. It also discusses the impact of increase in paper cost and fixed costs on selling price and profit. The bibliography includes relevant books on valuation, quantitative finance and instability in finance.

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Authors Note:

2ACCOUNTING
Table of Contents
Answer to Question 1......................................................................................................................3
Answer to Question 2......................................................................................................................3
Answer to Question 3......................................................................................................................4
Answer to Question 4......................................................................................................................4
Answer to Question 5......................................................................................................................5
Bibliography....................................................................................................................................8

3ACCOUNTING
Answer to Question 1
Statement Showing calculation of operating cost, Profit and selling price
Number of cards
Particulars
Hou
rs
Rate per
Invitation 100 300 550 1000 1250
100 Cost
preparation
work 4 30
£
120.00
£
120.00
£
120.00
£
120.00
£
120.00
Design Work 120
£
120.00
£
120.00
£
120.00
£
120.00
£
120.00
Paper Card 80
£
80.00
£
240.00
£
440.00
£
800.00
£
1,000.00
Printing 30
£
30.00
£
30.00
£
30.00
£
30.00
£
30.00
Direct Labor 2 23
£
46.00
£
138.00
£
253.00
£
460.00
£
575.00
Fixed
overheads 150
£
150.00
£
150.00
£
150.00
£
150.00
£
150.00
Total cost
£
546.00
£
798.00
£1,113
.00
£
1,680.00
£
1,995.00
Profit 50%
£
273.00
£
399.00
£
556.50
£
840.00
£
997.50
Total sales
£
819.00
£
1,197.00
£1,669
.50
£
2,520.00
£
2,992.50
Selling price
per 100
£
819.00
£
399.00
£
303.55
£
252.00
£
239.40
Answer to Question 2
Statement Showing calculation of Profit for each partner
Partners A B C
Profit Sharing Ratio 50% 30% 20%
No. of Cards Profit Share of Each Partner
100 £ 273.00 £ 136.50 £ 81.90 £ 54.60
300 £ 399.00 £ 199.50 £ 119.70 £ 79.80
550 £ 556.50 £ 278.25 £ 166.95 £ 111.30

4ACCOUNTING
1000 £ 840.00 £ 420.00 £ 252.00 £ 168.00
1250 £ 997.50 £ 498.75 £ 299.25 £ 199.50
Answer to Question 3
100 300 550 1000 1250
£-
£100.00
£200.00
£300.00
£400.00
£500.00
£600.00
£700.00
£800.00
£900.00
£1,000.00
Profit
Figure showing Profit at different levels.
Answer to Question 4
The increase in paper cost will result in increase in selling price. However, if the old
selling price is maintained then it becomes unprofitable. The calculations are shown below:
Statement Showing calculation of operating cost, Profit and selling price
Number of cards
Particulars
Ho
urs
Rate per
Invitation 100 300 550 1000 1250

5ACCOUNTING
100 Cost
preparation work 4 30
£
120.00
£
120.00
£
120.00
£
120.00
£
120.00
Design Work 120
£
120.00
£
120.00
£
120.00
£
120.00
£
120.00
Paper Card 90
£
90.00
£
270.00
£
495.00
£
900.00
£
1,125.0
0
Printing 30
£
30.00
£
30.00
£
30.00
£
30.00
£
30.00
Direct Labour 2 23
£
46.00
£
138.00
£
253.00
£
460.00
£
575.00
Fixed overheads 150
£
150.00
£
150.00
£
150.00
£
150.00
£
150.00
Total cost
£
556.00
£
828.00
£
1,168.
00
£
1,780.00
£
2,120.0
0
Profit 50%
£
278.00
£
414.00
£
584.00
£
890.00
£
1,060.0
0
Total sales
£
834.00
£
1,242.00
£
1,752.
00
£
2,670.00
£
3,180.0
0
Selling price per
100
£
834.00
£
414.00
£
318.55
£
267.00
£
254.40
Existing selling
Price
£
819.00
£
399.00
£
303.55
£
252.00
£
239.40
Profit based on old
selling price
£
263.00
-£
429.00
-£
864.45
-£
1,528.00
-£
1,880.6
0
Answer to Question 5
The increase in fixed costs results in increase in selling price. If the selling price is not
revised then it becomes unprofitable.
Statement showing Calculation of Profit on change in fixed cost

6ACCOUNTING
Number of cards Printed
Particulars
Old
Rat
e
Percenta
ge
Increase
H
ou
rs
Rat
e
per 100 300 550 1000 1250
100 Cost
Preparation
work 30 25% 4
£
37.
50
£
150.0
0
£
150.00
£
-
£
-
£
-
Design Work 120 25%
£
150
.00
£
37.50
£
37.50
£
37.50
£
37.50
£
37.50
Paper Card 80
£
80.
00
£
80.00
£
240.00
£
440.00
£
800.00
£
1,000.00
Printing 30
£
30.
00
£
30.00
£
80.00
£
80.00
£
80.00
£
80.00
Direct Labour 23 2
£
23.
00
£
46.00
£
138.00
£
253.00
£
460.00
£
575.00
Fixed
overheads 150 25%
£
187
.50
£
187.5
0
£
23.00
£
23.00
£
23.00
£
23.00
Total cost
£
531.0
0
£
668.50
£
833.50
£
1,400.5
0
£
1,715.50
Profit
50
%
£
265.5
0
£
669.00
£
834.00
£
1,401.0
0
£
1,716.00
Total sales
£
796.5
0
£
1,337.
50
£
1,667.
50
£
2,801.5
0
£
3,431.50
Selling price
per 100
£
796.5
0
£
445.83
£
303.18
£
280.15
£
274.52
Existing
selling Price
£
819.0
0
£
399.00
£
303.55
£
252.00
£
239.40
Profit based
on old selling
price
£
288.0
0
-£
269.50
-£
529.95
-£
1,148.5
0
-£
1,476.10

7ACCOUNTING

8ACCOUNTING
Bibliography
Addison, P.S., 2017. The illustrated wavelet transform handbook: introductory theory and
applications in science, engineering, medicine and finance. CRC press.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
Härdle, W.K., Hautsch, N. and Overbeck, L. eds., 2017. Applied quantitative finance (Vol. 2).
Springer.
Minsky, H., 2016. Can" it" happen again?: essays on instability and finance. Routledge.