Cost Analysis: Please provide some explanation and calculation. ASSIGNMENT 1-A C
ID: 2328265 • Letter: C
Question
Cost Analysis: Please provide some explanation and calculation.
ASSIGNMENT 1-A CASE: COSTING BUSINESS CONSULTING After graduating you decide to start your own consulting business in Accounting Information Systems (AIS). You acquire two customers for your AIS consulting services: Customer A and Customer B. You contract jobs Al and A2 with customer A, and job B1 with customer B In planning your costing system, you decide that the three contracted jobs are your cost objects. Your major costing objectives are billing your customers for the jobs and assessing job profitability. You choose your cost driver to be the total number of hours worked and hours traveled. For the first year of operations you plan to do all the work on your own. Your budgeted activity data for the forthcoming year is presented in Table 1 below Table 1: Budgeted Activity Data (Annual) Jobs W. Hours T. Hours Total # Visits A1 500 120 620 100 A2 600 220 820 150 B1 900 280 1180 80 Total 2000 620 2620 330 W. Hours- Work hours to serve customers at t T. Hours Hours traveled to customer premises # Visits-Number of visits to customer premises heir premises and from the central office Your budgeted office, utilities, systems equipment and travel costs are given in Table 2 below: TABLE 2: BUDGETED OFFICE, UTILITIES, SYSTEMS, EQIPMENT& TRAVEL COSTS Office space (Rent): S2,000 (Monthly) Electricity: Systems Telecommunications: S 700 (Monthly) Equipment (Leased): S 400 (Monthly) Travel Costs S 600 (Monthly) S 800 (Monthly) on Total Costs: $5,000 (Monthly) x 12 months = $60,000 (Annual)Explanation / Answer
1.In costing jobs, total hours worked and travelled is taken as cost driver instead of total number of visits is because there may be idle time in the visits and sometimes we have visited for just examining the work but not for doing work. So beacuse of having normal loss and idle time in the business we have to choose the productive hours worked in the business
2. Direct costs to the job are Travel costs, Telecommunications, Systems and indirect costs are Office rent, Electricity and Equipment lease
3. Calculation of Budgeted accounting oriented costs
4. Calculation of economic budget oriented costs
5. The accounting costs will increase with a value of 262000 and there will be no change in economic costs because there will be no oppurtunity costs as the company also gives the same salary
6. Based on Economic costs because the total costs as per cost accounting includes all these implicit costs, expilicit costs and oppurtunity costs
8. Beacuse there will be changes in rates and prices of the products than bugeted. So there will be differences between budgeted and actual.
Thank you
Particulars Amount Office rent 24000(2000*12) Electricity 7200 Systems 9600 Telecommunications 8400 Equipment leased 4800 Travel costs 6000 Total 60000