NORTH SOUTH UNIVERSITY

ACT 202 Group Project

Group Name: Creative

Semester: Summer-2017.
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 Introduction to Managerial Accounting
Course Code: ACT-202
Section-24

Topic: Determining Manufacturing Cost of a Product,

and Performing CVP and Variance Analysis.

Submitted to:
Natasha Chowdhury
Lecturer
Department of Accounting & Finance
North South University.

Submitted by:

Ashiqur Rahman 1521722030

Tanvir Sarkar 1612430030
Md. Akib Gaffar Ali Mahi 1610602030

Date of Submission-August 19, 2017.

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Table of Content:

1. Letter of Submission--------------------------------04

2. Executive Summary---------------------------------05

3. Business & Product details-------------------------06

4. Total Cost---------------------------------------------07

5. Production Process----------------------------------08

6. Depreciation for Fixed assets----------------------08

7. Cost of per cake--------------------------------------09

8. Profit Margin-----------------------------------------10

9. Contribution Margin, Break Even Point Units—10

10.CVP Grape ------------------------------------------11

11.Manufacturing Over head--------------------------12

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 1. Letter of Submission

August 19, 2017

Natasha Chowdhury

Lecturer

Department of Accounting & Finance

School of Business & Economics

North South University

Subject: Submission of group project Determining Manufacturing Cost of a Product, and

Performing CVP and Variance Analysis

Dear Madam,

We are pleased to present our group project, which involved Determining Manufacturing Cost of
a Product, and Performing CVP and Variance Analysis. This project is due on August 19, 2017,
and is a requirement to fulfill the grading criteria for the course ACT202, for the semester of
Summer-2017.

This is truly a fascinating experience for all of us. We have learned a lot from this project and
that will be very useful for us in the future life.

Therefore, we would convey our respects for your valuable knowledge that you shared with us.

Sincerely,

Ashiqur Rahman 1521722030

Tanvir Sarkar 1612430030

Md. Akib Gaffar Ali Mahi 1610602030

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 2. Executive Summary

The project we have conducted is based on a local cake store that manufactures its own cake and
sells it to customers. Basically, the business mainly exists in the winter season but the owner of
this store sales this kind of cake all season. The store has set up with archaic technic aiming to
provide customers with excellent product and to create and continue business because the area is also
filled with lots of competitors at the same time.

We ran our research focusing on their production and determine the cost of each cake. At the time of
working with the store we went through some real business experience, and also learned about
various criteria of business.

In this project, we are going to portray every single cost of the business. Such as; Direct material,
Manufacturing Over Head, profit margin, break-even point etc. We also study on some growth
strategy that can help them to spread their business by incurring more profit.

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 3. Business & Product Details

The store located in the Uttara area, sector no. 6, on the side of a road. This kind of store located
on road just because of immediate consumption. It is so cheaper on an average meal than in
restaurant meals. It is a low budgeted business, so that’s why owners do not keep a special name
for this store. Everyone called this ‘Pithar Dokan’. There is a woman who conducts the whole
store name, Mrs. Anjumonoaara Begum. She is the actual owner of this shop. She basically sales
only one kind of cake which is locally called ‘Chitol Pitha’. When we interviewed her she
claimed that there are many portable food booths who sales versatile cake. She basically operates
her business on winter season because in winter the demands for cakes reach so high. But not
only winter season she sales cake also other season she sales this kind of cake. In her little
income she have to maintain her family that’s why she sales this kind of cake all season.

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 4. Total Costs
Variable Costs for 1 day:
1. Rice 5 kilograms ( 5*36) = 180
2. Blended fish & Chili = 100
3. Firewood = 100
4. Pan = 40
5. Salt = 20

Direct Materials 440

1. Paper = 3
2. Cost of blending rice = 10
3. Spot fare = 10
4. Kerosin for lamp = 35

Manufacturing Over Head 58

Fixed Costs:
1. Cover (per cover 15*4) = 60
2. Mirror frame = 500
3. Aluminum Cooker = 200
4. Plates = 100
5. Sharp Metal = 20
6. Big Spoon = 30
7. Stove = 200

Total fixed cost 910

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 5. Production Process

The production process is not complicated for this business. Most cakes use better made blended
rice, that’s all it needed. The blended rice is mixed with water along with pinch of salt and finally
mixing the whole things with hand. After mixing it properly in the aluminum cooker, the
creamed rice will feel like greasy and slippery. Then with the help of a big spoon, a small
amount will pour into the pan and wait till it become crisp.

6. Depreciation for fixed assets

Name Cost Rate of Allocation of Depreciation
Depreciation for 1 month
Cover 60 33% 19.8
Mirror frame 500 33% 165
Aluminum cooker 200 33% 66
Plates 100 33% 33
Sharp Metal 20 33% 6.6
Big spoon 30 33% 9.9
Stove 200 33% 66
Total Depreciation for 1 month = 366

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 .7. Cost of Per Cake

With 1 kilogram blended rice, Mrs. Anjumonoaara can make 40 cakes

so, in total she can made (40*5) 200 cakes in a day.

All the following costs are counted for 1 day.

Total Variable Cost= Direct Materials + Manufacturing Over Head

=440+58

=498

Total Fixed Cost = 366/30

= 12.2

Total cost = 498+12.2

=510.2

Cost of per cake = 510.2/200

= 2.551

Mrs. Anjumonoaara is following Process Costing method because every unit product is
homogeneous and same cost for each unit product.

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 8. Profit Margin

Sales (200 units*5 tk per unit) =1000

Direct Material =(440)

Manufacturing Over Head =(58)

Depreciation =(12.2)

Customer Margin 489.8

9. Contribution Margin,
Break Even in Units
Sales = 1000 (200*5)
Variable costs = (498)

Contribution Margin 502 (200*2.51)

Total contribution Margin

Contribution Margin Ratio= *100 =(502/1000)*100=50.2%
Sales Revenue

Break Even Point in Units= Fixed Cost/Contribution Margin Per unit

=366/2.51
=146 units (almost)
Break Even Point in Sales = Fixed Costs/ Contribution Margin Ratio
= 366/0.502
=729 taka

We told the store owner if she made 146 cakes in a day, she will incur neither profit nor loss. Moreover, if
she sales in total 729 taka on that time she will also incus neither profit nor loss.

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 10.CVP Graph
Y-Values
800

700

600

500

400

300

200

100

0
0.5 1 1.5 2 2.5 3 3.5

S ales
1000

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 11.Manufacturing Over Head
Total estimated MOH- 58
Estimated labor hour- 5 hours
Actual labou hour – 4 hours

POHR=58/5
=11.6

MOH Applied = POHR*Actual Labor Hour

= 11.6*4
=46.4

12.Conclusion

Throughout the whole report, we tried to make Determining Manufacturing Cost of a Product,
and Performing CVP and Variance Analysis for a portable cake stall.

References:

1 Survey on portable cake stall

2 Managerial Account – Garrison, Noreen, Brewer (Fifteen Edition)

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