Selling and distribution expense are assumed to be

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Chemistry for Today: General, Organic, and Biochemistry
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Chapter 18 / Exercise 18.18
Chemistry for Today: General, Organic, and Biochemistry
Seager/Slabaugh
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Selling and distribution expense are assumed to be incured for promoting and distributing sales. These direct and indirect costs are used in manufacturing company. In the case of Kalti food share company also this types of costs are there.
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Chemistry for Today: General, Organic, and Biochemistry
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Chapter 18 / Exercise 18.18
Chemistry for Today: General, Organic, and Biochemistry
Seager/Slabaugh
Expert Verified
3.5 ALLOCATION OF PRODUCTION COSTS 3.5.1. DIRECT MATERIAL COST ALLOCATION It is the most significant elements of cost and accounts for a higher percent of the total cost of production. Then materials issued summary as per monthly material consumption register will give the data for materials consumed for each product. Issue vouchers shall indicate cost centers together with the type of product to be produced with the material. Monthly totals of material consumption register must agree with that of the general account registers. 3.5.2 DIRECT LABOUR COST ALLOCATION It is the cost of human endeavor. Then payrolls shall workers in each production unit which can be categorized as direct labour where as indirect labour workers and administrative workers accumulated in the respective production unit each accumulated monthly. Direct labour cost shall be distributed to products as per quantities produced. 3.5.3 FACTORY OVER HEADS COST ALLOCATION The factory also use actual over head rate which is the rate at which overhead cost are actually incurred during an accounting period. Cost allocation base that should be used when allocating the indirect cost pools at Kaliti food share company must be appropriate cost allocation base. APOHR= AOH Cost for the accounting period where: Actual product
Actual amount of the cost driver APOHR= overhead 3.6. COST STATEMENT Kaliti food share company prepares cost of good manufacturing statements monthly, then the total amount for the year is added for the preparation of financial statements i.e income statements. It is this measurements that shows profitability of the company. Therefore, the need for reduced production costs is given great attention in attaining the organizational objectives. Reports of the cost of income statements are shown bellow (source; observation from annual cost reports). KALITI FOOD SHARE COMPANY INCOME STATEMENTS FOR THE YEAR ENDED SENE 30, 2002 Sales ……………………………………………………… Birr. 92,888,330.60 Less: cost of good sold ……………………………………….(81,068,645.28) Gross operating surplus………………………………….Birr 11,819,685.32 Other Income …………………………………………………….. 551,156.96 Total income………………………………………………..Birr 12,370,842.28 Expenses Selling and distribution expense ……………………………. 1,958,50079 General and admis exp…………………………………………. 6,443.311.67 Audit fee………………………………………………………………… .... 12,000 Bank Interest…………………………………………………… .... 146,401.13
Board and audit committee fee…………………………………. 71.375.00 Total expense……………………………………………………..8,631.588.59 Net surplus before tax …………………………………………3,739,253.69

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