The variable costs are raw materials

Running Head: ACCOUNTING 1
ACCOUNTING

Running Head: ACCOUNTING
Contents
Question 1........................................................................................................................................3
Part a............................................................................................................................................3
Part b............................................................................................................................................4
Part c............................................................................................................................................4
Part D...........................................................................................................................................5
Part E)..........................................................................................................................................5
Question 2........................................................................................................................................6
A...................................................................................................................................................6
B...................................................................................................................................................7
Question 3........................................................................................................................................8
References......................................................................................................................................10

Running Head: ACCOUNTING
Question 1
Part a
Product costs
When the costs are incurred to create a product they are termed as the product costs. Such
costs are inclusive of direct labor, materials, supplies as well as consumable products, overheads.
The costs which are basically required to cater the service to the customer are known as the
product costs. For example, the example costs are inventory cost, trading costs (Spickova &
Myskova, 2015).
Period costs
There are certain costs which cannot be capitalized into prepaid expenses, or fixed assets.
In case of the period costs, the cost is more attached with the passage of time with a transactional
event. Most of the times, these costs are a part of income statement under the heading of selling
and administrative expenses category. For example, selling expenses and administrative
expenses such as salaries related to the production of the product.
Variable costs
Variable costs are costs that change as the quantity of the good or service that a business
produces changes. Variable costs are those costs that can fluctuate over the period and it can also
be recognized as summation of marginal costs over the units pmanufactured. The variable costs
are raw materials and purchases falling as te best example of variable costs (Klychova, Zakirova,
Zakirov & Valieva, 2015).
Fixed costs

Running Head: ACCOUNTING
Fixed costs can be termed as that category of the cost, which does not change over the
period of the time. These costs are bound to happen and they cannot be avoided, hence, these
costs are termed as fixed costs. Few examples of fixed costs are depreciation, rent, insurance and
property taxes (Cascio, 2015).
Semi-variable costs
A semi-variable costs, also known as a semi-fixed cost or the mixed cost is the cost,
which is the composition of both the fixed and the variable components. The fixed cost are
incurred for a limited time period and thereafter the costs are converted into the variable costs
once the production level exceeds. For example telephone and electricity expenses fall under the
category of semi-variable costs.
Part b
PART B 2000 2000
Budgeted prime costs per unit for
standard mug
Price per
unit
Department
ONE
Price per
unit
Department
Two
Direct material 1.5 300 0.5 500
Direct Labor 0.2 400 0.1 200
Direct Expenses 0.5 1000 0.1 200
Total budgeted prime costs 1700 900
Part c
Production overhead absorption rates
Particulars
Department
ONE
Department
Two
Manufacturing overhead
Supervisors’ and manager’s salary 1200000 1600000
Rent and rates 1800000 3200000
Electricity and insurance 300000 500000
Machines and equipment depreciation 330000 1900000
Total manufacturing overhead 3630000 7200000
Mahcine hour 100000