MAC2601 EXAM STUDY PACK
MAC2601
EXAM STUDY PACK
Assignment 1&2 Semester 1&2
,MAC2601 EXAM STUDY PACK
MAC REVISION STUDY PACK
TOPIC 1: NATURE AND BEHAVIOUR OF COSTS
(1) Manufacturing cost/ Production cost
Manufacturing costs - costs incurred in the manufacturing process of a product.
• Direct + Indirect cost = Manufacturing cost
• Direct cost = Direct Material + Direct Labour
• Total Direct cost = Prime cost
• Conversion cost = Direct Labour + Manufacturing overheads
• Indirect cost = Indirect material + Indirect Labour
• Total Indirect cost = Overheads
Direct cost – costs directly linked to the product.
Indirect cost – costs indirectly linked to the product
Manufacturing
Total cost = variable cost + fixed cost
• Variable cost – costs that vary with production e.g. material costs
• Fixed cost – costs that are constant throughout the manufacturing period e.g. Rent.
• Semi variable cost – cost that have both elements variable element and fixed element
e.g. Telephone bill
Non Manufacturing cost / Period costs
Non Manufacturing cost – costs incurred after the manufacturing process
a. Marketing cost – costs related to the sale and distribution of the final product.
b. Administrative costs – costs incurred in directing and controlling the organization.
Splitting – fixed from variable cost
Methods used
▪ High low method
▪ Linear equation
▪ Scatter diagram
▪ Simple regression analysis / least squares methods
We will concentrate on the high low method
e.g.
Observations No. of Units Total overhead cost
1 800 105 000
2 650 95 000
3 750 95 000
4 900 120 000
1
,MAC2601 EXAM STUDY PACK
1 step - identify the two points highest level and the lowest level and calculated the differences.
High 900 120 000
Low 650 95 000
250 25 000
2. Calculate the variable rate
𝑐ℎ𝑎𝑛g𝑒 i𝑛 𝑅 25 000
= = R100/m
𝑐ℎ𝑎𝑛g𝑒 i𝑛 250
𝑈𝑛i𝑡𝑠
Variable cost after producing 900 units and 900 x 100 = R90 000
3. Calculating fixed cost
Total cost = fixed cost + variable cost.
120 000 = fixed cost + 90 000 (900x100)
120 000 = f x d cost + 90 000
120 000 – 90 000 = f x d COH
30 000 = FX d cost
2
, MAC2601 EXAM STUDY PACK
3
MAC2601
EXAM STUDY PACK
Assignment 1&2 Semester 1&2
,MAC2601 EXAM STUDY PACK
MAC REVISION STUDY PACK
TOPIC 1: NATURE AND BEHAVIOUR OF COSTS
(1) Manufacturing cost/ Production cost
Manufacturing costs - costs incurred in the manufacturing process of a product.
• Direct + Indirect cost = Manufacturing cost
• Direct cost = Direct Material + Direct Labour
• Total Direct cost = Prime cost
• Conversion cost = Direct Labour + Manufacturing overheads
• Indirect cost = Indirect material + Indirect Labour
• Total Indirect cost = Overheads
Direct cost – costs directly linked to the product.
Indirect cost – costs indirectly linked to the product
Manufacturing
Total cost = variable cost + fixed cost
• Variable cost – costs that vary with production e.g. material costs
• Fixed cost – costs that are constant throughout the manufacturing period e.g. Rent.
• Semi variable cost – cost that have both elements variable element and fixed element
e.g. Telephone bill
Non Manufacturing cost / Period costs
Non Manufacturing cost – costs incurred after the manufacturing process
a. Marketing cost – costs related to the sale and distribution of the final product.
b. Administrative costs – costs incurred in directing and controlling the organization.
Splitting – fixed from variable cost
Methods used
▪ High low method
▪ Linear equation
▪ Scatter diagram
▪ Simple regression analysis / least squares methods
We will concentrate on the high low method
e.g.
Observations No. of Units Total overhead cost
1 800 105 000
2 650 95 000
3 750 95 000
4 900 120 000
1
,MAC2601 EXAM STUDY PACK
1 step - identify the two points highest level and the lowest level and calculated the differences.
High 900 120 000
Low 650 95 000
250 25 000
2. Calculate the variable rate
𝑐ℎ𝑎𝑛g𝑒 i𝑛 𝑅 25 000
= = R100/m
𝑐ℎ𝑎𝑛g𝑒 i𝑛 250
𝑈𝑛i𝑡𝑠
Variable cost after producing 900 units and 900 x 100 = R90 000
3. Calculating fixed cost
Total cost = fixed cost + variable cost.
120 000 = fixed cost + 90 000 (900x100)
120 000 = f x d cost + 90 000
120 000 – 90 000 = f x d COH
30 000 = FX d cost
2
, MAC2601 EXAM STUDY PACK
3
