Mgt402 GDB No. 1 Announced
Tuesday, April 12, 2011 Posted In Acc , MGT Edit ThisQuestion:
Mr. Hassan deals in chair manufacturing. He got an order to manufacture 3000 chairs of a specific design for a school lab. It requires a cutter costing Rs.50, 000 to design the chair that is useless after completing this order. Wood used for this order is of Rs.200, 000, nails costing Rs.60, 000, furniture polish costing Rs.90, 000 and miscellaneous factory overhead charges Rs.25,000. Labor charges are Rs.50 per chair. He has appointed a supervisor at Rs.10,000 per month only for the completion of this order. (Time required to complete the order is 2 months).
Calculate the following for the whole order:Total factory cost
Note:
Read the instructions mentioned in announcement carefully before attempting it.
Use the following format to answer:
Prime cost: _____________________
Total factory cost: ________________
Solution:
According to costing methods and techniques it is divide into 2 categories.
DIRECT Cost.
INDIRECT Cost.
Direct costs are the costs directly charged to produce any product.
These costs must be traceable.
...Indirect costs are the costs which are not directly involve in producing any product but are supporting costs to produce any product.
These costs are not traceable.
In this GDB of manufacturing furniture from woods, wood is the direct material used in production and cost incurred in manufacturing will be DIRECT Cost and it can be traced at per unit.
But nails and polishing material used in furniture is not traceable at per unit, so it will be treated as INDIRECT Cost.
