Costing Methods

This document discusses various costing methods and their applications. It covers topics such as hiring strategies, revenue budgeting, flexible budgets, standard costing system, activity-based costing, and absorption costing. The document provides insights and recommendations for optimizing costs and improving budgeting.

Running Head: COSTING METHOD 1
COSTING METHODS

Running Head: COSTING METHOD
Table of Contents
Question 1........................................................................................................................................3
Part 3............................................................................................................................................3
Part 4............................................................................................................................................3
Question 2........................................................................................................................................3
Part 2............................................................................................................................................3
Part 4............................................................................................................................................3
Question 3........................................................................................................................................4
PART 5........................................................................................................................................4
Question 4........................................................................................................................................5
Part 1............................................................................................................................................5
Question 5........................................................................................................................................5
Part 2............................................................................................................................................5
Part 4............................................................................................................................................5
References........................................................................................................................................6

Running Head: COSTING METHOD
Question 1
Part 3
At times there is a situation where the number of the faculties is less and it needs a balance in the
gap. In order to fill the gap the full time faculty is required to be hired by the Resort Island.
Hence the five major actions that must be taken by the Resort Island are presented below
(Langer, 2016).
 Make use of the part time teachers to avoid the additional costs
 The shifts of the teachers can be placed in alternate days of the week.
 The class size shall be reduced and the sections shall be combined to make use of the
limited hours (Weinstock, 2015).
 The hours of teaching can also be increased to give a lot of stuff at one go
 The substitute teachers can also be appointed as a source of the extra staff.
Part 4
The key driver of any college is the student and the fees paid by the student as it would
help them run the operations of the costing. The DVC really are unaware of the concept of the
linkages with costing and budgeting and hence their statement that the academic staff is the real
driver is wrong. This idea is also not in the alignment with the assumption made at the starting
(Miller, 2018).
Revenue Budget
Current student enrolment 15000
Add: projected increase 750
Total projected students 15750
Less: tuition fee scholarship 150
Tuition paying students 15600
Average class * Per semester 320
Total projected student fees 4992000
Less: Staff salary 120000
Tution revenue 4872000

Running Head: COSTING METHOD
Number of staff needed
Projected students 15750
Classes per student per semester 20
Projected student enrolment 315000
Average of the class of the
student 80
Classes to be taught during the
year 3937.5
Classes taught by professro 5
Need of Faculty 787.5
Question 2
Part 2
The flexible budgets are a budget that adjusts with respect to the changes in volume or
activity. It tends to be the more useful rather than the static budget. When analyzed the role of
the flexible budget with respect to the various kind of applications and the policies by the Good
Health Insurance Company. Henceforth, assembling the versatile adaptable flexible plan for the
respective would cover the overhead costs. For example, setting up a hundred life inclusion
applications will include considerably more overhead cost than taking care of a hundred vehicle
assurance applications (Wood, 2016).
Part 4
MEMORANDUM
TO: GOOD HEALTH MANAGEMENT
FROM: Chief Accountant
DATE: 14th May 2019
PURPOSE: Advantages of the standard costing system

Running Head: COSTING METHOD
This memorandum has been prepares in order to attract the attention of the management of the
Good Health towards advantages of the STANDARD COSTING SYSTEM.
Standard costing system is the system which is used mainly by the manufacturing companies.
Standard costs are used as the target costs and are developed form the data based on the history.
There is a high level of the variation as the factors are of unprecedented nature that tends to
create the fluctuation in the costs (Mahal & Hossain, 2015).
 The standard expenses, if implemented in the proper manner, will unveil wasteful aspects
in activities, which can be altogether examined and the necessary and the immediate
actions can be taken.
 Standard expenses are more helpful than regular expenses in order to prepare the budget
as on the grounds standard expenses at various generation levels and for various item
blends are promptly incorporated up with the total costs as it is required by the budget.
 The standard costing also helps to curtail the costs for the company on an overall basis. It
establishes the coordination between all levels of the management and all the functions
used in making the product (Revans, 2016).
 It can also help in reduction of the labor and the clerical expenses by avoiding the process
of recording the transactions in detail.
 Standard expenses when contrasted with real expenses can be utilized at assessing selling
costs. At the point when standard unit costs are accessible, expected expenses and deals
costs can be processed based on standard expenses.
 Standard expenses are foreordained costs which help the executives in the choice
procedure by giving standard unit expenses to different dimensions of movement.
 Standard expenses are in this manner helpful to the board in deciding value strategies,
getting ready offers for forthcoming requests, arranging creation of new item and new
techniques, and outfitting cost assesses in every administrative choice.
Flexible budget
Standard clerical hours
Policy type
Standard
hours
Actual
Activity
Standard clerical
hours

Running Head: COSTING METHOD
Health 1 375 375
Life 1.5 300 450
Automobile 2 150 300
Renter 2 600 1200
Homeowner 5 300 1500
3825
Total budgeted monthly overhead costs
budgeted variable
costs * total clerical
hours
Add:
budgeted fixed
overhead costs
the equation would be (10 x H) + 6000
Flexible budget for the total overhead in April
$
38,250.00
$
6,000.00
$
44,250.00
Question 3
PART 5
Due to the extremely costly arena the development chemicals mainly focuses on the
machine hours and the hazardous material as the activity drivers for the purpose of the
calculation. These costs are more expensive in comparison to the other costs as well. The major
problem can occur when the overhead costs per box is undervalued and the other costs are
overvalued. The price of the products may rise or fall and therefore the conventional methods are
dumped against the activity based costing method by Pix Photographic Supply Limited. This
system assigns the costs on the basis of the key drivers and not on the basis of the total costs
(Kaplan and Atkinson, 2015).
Overhead assigned for the development of the chemical order
Overhead assigned for the development of the chemical order

Running Head: COSTING METHOD
Overhead Cost pool Predetermined
overhead rate
Machine set ups 3000
Material Handling 3
Hazardous waste control 7.5
Quality control 112.5
other overhead costs 15
total
Overhead cost per chemical box
Predetermined overhead rate
Overhead to be assigned to the order for development chemicals
A
B Overhead cost per box of chemicals
Overhead Cost pool Predetermined
overhead rate
Machine set ups 3000
Material Handling 3
Hazardous waste control 7.5

Running Head: COSTING METHOD
Quality control 112.5
other overhead costs 15
total
Overhead cost for 100 coated plates used in the film development
Direct materials
Direct Labour
Total Cost
Question 4
Part 1
LETTER
TO: Managing Director
FROM: Consultancy Firm
SUBJECT: Selling the product at the split off or continuing the process.
After calculating the costs it can be stated that the company shall not continue the product and its
processes as it would let the company face a loss of the $11200. This loss can be avoided if the
product is sold at the split off stage, a stage where the manufacturing of the production are
separated. As it can be observed from the calculations the split off point is beneficial for the cool
pool management. There are several issues that must be kept in head when the decision is
required to be outsourced which starts from the technology used, the market price, the brand
loyalty and the environmental factors as well (Yin, Cui, Zhou, Wang, Huang & Sadiq, 2016).
Banolide Amount

Running Head: COSTING METHOD
Allocation of Joint Cost
$
12,000.00
Sale value at split off Point
$
5,000.00
Sale value after processing further
$
20,000.00
Additional processing costs
$
26,200.00
Incremental Profit or Loss if processed further
Sales value incremental-Additional processing cost
$
(11,200.00)
Question 5
Part 2
The costing technique that is appearing higher benefit is the variable costing as it regards all the
variable costs as costs, though the fixed costs are comprehended as the period things. The
absorption costing technique on the contrary contemplates, both the variable just as the fixed
expenses
Part 4
It is advised to the management of the Slumber world’s Management that it must precede
with the absorption costing technique as it will produce the accurate result after taking into
consideration the nature of both the variable as well as the fixed costs. The proper allocation is
necessary otherwise the extra profit can be booked and hence in order to get the transparent
results the absorption costing is the answer to all the problems. This method is also required to be
followed by the GAAP and hence the company shall comply with the method of absorption
costing (Mishan, 2015).
CALCULATION OF COST PER UNIT
Direct material used 1,20,000
Direct labour cost incurred 60,000
Fixed manufacturing overhead (actual and planned) 75,000
Variable manufacturing overhead (actual and planned) 36,000
Fixed selling and administrative expenses 90,000

Running Head: COSTING METHOD
Variable selling and administrative expenses 13,500
Finished goods inventory, 1 January 59700
Variable Costing Absoprtion costing
Production cost per unit
Direct materials 8 8 120000
Labours 4 4 60000
Overhead 2.4 2.4 36000
14.4 14.4
Less: Fixed cost 5 75000
Fixed selling and adminstrative 11.0 90000
Fixed cost per unit 11.0
Cost per unit 25.40
Profit and loss statement in case of Variable Absorption
Sales 810000 810000
Less: Variable cost
Cost of goods sold 194400 342900
Selling expenses 13500
Total variable costs 207900 342900
Contribution margin 602100 467100
Fixed costs
Overhead 75000 13500
Selling 90000 90000
Total fixed 165000 103500
Profit 437100 239400
FINISHED GOODS
Variable Costing 21600
Absoprtion costing 38100

Running Head: COSTING METHOD
References
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Langer, E. S. (2016). Hiring Difficulties Compound Downstream Processing Woes: Process
Development Jobs Still the Most Difficult to Fill. Genetic Engineering & Biotechnology
News, 36(16), 33-33.
Mahal, I., & Hossain, A. (2015). Activity-Based Costing (ABC)–An Effective Tool for Better
Management. Research Journal of Finance and Accounting, 6(4), 66-74.
Miller, G. (2018). Performance based budgeting. Routledge.
Mishan, E.J., 2015. Elements of Cost-Benefit Analysis (Routledge Revivals). Routledge.
Revans, R. (2016). The enterprise as a learning system. In Action learning in practice (pp. 43-
48). Routledge.
Weinstock, D. (2015). Hiring new staff? Aim for success by onboarding. The Journal of medical
practice management: MPM, 31(2), 96.
Wood, A. J. (2016). Flexible scheduling, degradation of job quality and barriers to collective
voice. Human Relations, 69(10), 1989-2010.
Yin, H., Cui, B., Zhou, X., Wang, W., Huang, Z., & Sadiq, S. (2016). Joint modeling of user
check-in behaviors for real-time point-of-interest recommendation. ACM Transactions
on Information Systems (TOIS), 35(2), 11.