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    Cost Classification

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    Rasagnya reddy
    This document provides information about the costs incurred by Pop's Burger Heaven restaurant and Celestial Funeral Homes to illustrate cost classification, tracing, and the preparation of income statements. It describes Pop's monthly sales, expenses, and cost categories. It also provides Celestial's overhead cost formula and details about its annual funerals, expenses, and pricing to calculate unit product cost and prepare an income statement.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Cost Classification

    Uploaded by

    Rasagnya reddy
    221 views2 pages
    This document provides information about the costs incurred by Pop's Burger Heaven restaurant and Celestial Funeral Homes to illustrate cost classification, tracing, and the preparation of income statements. It describes Pop's monthly sales, expenses, and cost categories. It also provides Celestial's overhead cost formula and details about its annual funerals, expenses, and pricing to calculate unit product cost and prepare an income statement.

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    This document provides information about the costs incurred by Pop's Burger Heaven restaurant and Celestial Funeral Homes to illustrate cost classification, tracing, and the preparation of income statements. It describes Pop's monthly sales, expenses, and cost categories. It also provides Celestial's overhead cost formula and details about its annual funerals, expenses, and pricing to calculate unit product cost and prepare an income statement.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    221 views2 pages

    Cost Classification

    Uploaded by

    Rasagnya reddy
    This document provides information about the costs incurred by Pop's Burger Heaven restaurant and Celestial Funeral Homes to illustrate cost classification, tracing, and the preparation of income statements. It describes Pop's monthly sales, expenses, and cost categories. It also provides Celestial's overhead cost formula and details about its annual funerals, expenses, and pricing to calculate unit product cost and prepare an income statement.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Cost Classification, Cost Tracing and Income Statement

    Manufacturing and Services Industries- Illustration


    1. Pop’s Burger Heaven produces and sells quarter hamburgers. Each Burger sells for
    $1.50. During December , Pop’s Sold 10,000 burgers (the average amount sold each
    month). The restaurant employs cooks, servers and one supervisor (the owner, John
    Peterson). All cooks and servers are par time employees schedules can be adjusted to
    the changes in demand. Demand varies on a weekly as well as monthly basis.
    2. A Janitor is hired to clean the building on a weekly basis. The building is leased from
    a local real estate company. The building has no seating capabilities. All orders are
    filled on a drive through basis.
    3. The supervisor schedules the work, open the building , counts the cash, advertises and
    is responsible for hiring and firing. The following costs were incurred during
    December:
    4.
    Particulars Amount ($) Particulars Amount ($)
    Hamburger Meat 1,600 Utilities 500
    Lettuce 300 Depreciation on 200
    Cooking Equipment

    Tomatoes 250 Cash register 50


    Buns 300 Advertising 100
    Other ingredients 20 Janitor’s Wages 120
    Cook’s Wages 2,550 Janitorial Supplies 50
    Server’s Wages 2,032 Rent 800
    Supervisor’s Salaray 2,000
    5. You ae required:
    a. Classify the cost of Pop’s December operations in one of the following categories:
    i. Direct Material
    ii. Direct Labour
    iii. Over head or Selling and Administrative Expenses
    b. Prepare an income statement for the month of December
    c. Suppose Pop’s also produces a grilled Chicken sandwich and you want to
    determine the cost of producing both Hamburger and grilled Chicken sandwiches.
    How would you assign the shared cost of depreciation for the cooking equipment
    to each product? Is this direct tracing , driver tracing or allocation? explain
    2. Service Cost:
    Celestial Funeral Homes offers a full range of services. Based on past experience Celestial
    use the following formula to describe its total over head Cost:
    Y=$2,000,000+ $50X, where Y= Total overhead cost and X= number of Funerals
    Overhead costs are assigned by divinding total overhead costs by the number of funerals.
    For a given funeral, the cost of direct materials ranges from $1,500 to $ 10,000, depending on
    the family’s selection of a coffin. The average cos is $ 4,000. Direct Labour averages $
    1,000per funeral. During 2019 Celestial conducted 1,000 funerals . the average price of
    charged for each funeral is $ 7,000. Celestial incurs annual selling expenses of $ 50,000 and
    administrative Expenses of $ 150,000.
    You are required: to find out the following
    a. Does Celestial sell a tangible or an intangible product? Explain
    b. Does Celestial use a functional – based or an activity based management account?
    Explain Do you think this is a good choice? Justify
    c. What is the total overhead cost incurred by Celestial for the year?
    d. What is the over head cost per funeral? For the year
    e. Calculate the unit product cost for the year
    f. Prepare an income statement for Celestial

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