Comprehensive Analysis of CTC's Monthly Income Statement Report

This report provides an analysis of Colonial Tap Company's (CTC) monthly income statement, focusing on cost classification and financial reporting practices. The report identifies that CTC does not classify costs into direct/indirect or variable/fixed categories, which hinders effective cost management. The company uses a cost-plus 50% markup pricing strategy based on direct materials and labor. The analysis suggests that implementing a more detailed cost classification system would improve CTC's cost management and financial reporting. Desklib offers a range of solved assignments and past papers to aid students in understanding financial analysis and accounting principles.

Running head: ANALYSIS OF CTC’S MONTHLY INCOME STATEMENT
Analysis of CTC’s Monthly Income Statement
Name of the Student:
Name of the University
Author Note:

1ANALYSIS OF CTC’S MONTHLY INCOME STATEMENT
Table of Contents
Answer to Question No. 1:.........................................................................................................2
Answer to Question No. 2:.........................................................................................................3
Answer to Question No. 3:.........................................................................................................4
References:.................................................................................................................................5

2ANALYSIS OF CTC’S MONTHLY INCOME STATEMENT
Answer to Question No. 1:
Cost Classification used in CTC’s Income Statement:
Behavior wise costs can be classified broadly into two parts, variable costs and fixed
costs, and nature wise it can be classified into direct and indirect costs. Direct materials,
direct labor and any other direct chargeable expenses are included in the prime cost of the
product. All the indirect materials, indirect labor and any other indirect expenses are included
in the Overhead. Overhead costs again can be classified into Manufacturing Overhead,
Administrative Overhead and Selling & Distribution Overhead.
Colonial Tap Company is a tap and plumbing materials manufacturer. They use cost
plus 50% markup for pricing their products. From the income statement of CTC, it can be
observed that, they do not classify their costs into direct and indirect or variable and fixed
costs. They take all the expenses together to calculate total expenses of the company, then
profit or loss is calculated by comparing the total sales revenue and total expenses. Their
policy is to add 50% markup on direct materials and direct labor costs.
Classification of costs in the income statement helps in better cost management,
which is lacking in the income statement of Colonial Tap Company.

3ANALYSIS OF CTC’S MONTHLY INCOME STATEMENT
Answer to Question No. 2:

4ANALYSIS OF CTC’S MONTHLY INCOME STATEMENT
Answer to Question No. 3:

5ANALYSIS OF CTC’S MONTHLY INCOME STATEMENT
References:
DRURY, C.M., 2013. Management and cost accounting. Springer.
Tappura, S., Sievänen, M., Heikkilä, J., Jussila, A. and Nenonen, N., 2015. A management
accounting perspective on safety. Safety science, 71, pp.151-159.