Running Header: Group Project, Semester 1, AY 2022-23​ ​ ​ ​​ 0

University of Technology, Jamaica

College of Business and Management

School of Business Administration

Module: Introduction to costing

Module Code : ACC3002

Title: Costing Group Project

Submitted by: Group 2:

Davia Daay - 2107446

Anessa Manderson -1902046

Jamar Hunter - 2007585

Jodene Bryan - 1702851

Nicolette Donaldson - 1702116

Rojay Burton -

Tutor: Ms. Rosemarie Dixon

Submission Date: November 17, 2023

 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​
1
Table of Content

Question 1........................................................................................................................................ 2
Question 2........................................................................................................................................ 5
Question 3........................................................................................................................................ 8
Pt. A........................................................................................................................................... 8
Pt. B........................................................................................................................................... 9
Pt. C......................................................................................................................................... 10
Pt. D......................................................................................................................................... 10
Question 4...................................................................................................................................... 11
Question 5...................................................................................................................................... 17
Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 2

Question 1

a.​ Calculate the EOQ based on the formula.

Annual Demand=
$500*2*12= 12000 units

Order cost=$500

Unit cost=$2000

Holding cost=
$15/100*2000=$300

EOQ= sqt2CoD/ch
sqrt2*500*12000/
300
= 200 units

b.​ Calculate the total cost based on the

EOQ.

Ordering cost= D/Q*CO

12000/200*300
= $30,000

Holding cost=Q/2*Ch
200/2*300=$30,000

Purchase price= D*UC

12000*$2000=$24,000
,000
Total cost=(D/Q*co)+(Q/2*CH)+(D*UC)
30,000+30,000+24,000,000=$24,060,000
Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 3

c. Calculate the total cost for each alternate order quantity.

QTY Purchase price Order cost Holding cost Total

D*UC D/Q*CO Q/2*CH $

200 $12000
12000*$2000= /200*$500=$30,000 (200/2)*$300 24,060,000
(EOQ)
$24,000,000 =$30,000

1000 (10%
discount) 12000*$2000*0.9 12000/1000*$500 (1000/2)*$300 21,756,000
(current
policy) 216,000,000 =$6000 =$150,000

500
(5%discount) 12000*$2000*95% 12000/500*$500 (500/2)*300 22,887,000
=$12,000
=22,800,000 =7500

800
(7.5%discount) 12000*$2000*92.5 12000/800*$500=$7500 800/2*$300 22,327,500
%=$7500
=$120,000

d.The Optimal order Quantity is 1000 units because it has the lowest amount ($21,756,000)
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 4

e) While the EOQ model can be useful for determining optimal order size, the assumptions on
which it rests may not be realistic. List four of these assumptions.

1) Demand is constant and known.

2) Constant ordering cost is known.

3) The constant per unit stockholding cost is known.

4)The constant per unit price is known.

 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 5

Question 2
Group 2
President, Parents-Teachers Association
DMP Academy
November 19, 2023

Mrs. Avis Powel

Principal and Managing Director
DMP Academy
Westgate Hill, Montego Bay
St. James

Subject: Concerns Regarding Teacher Turnover at DMP Academy

Dear Mrs. Powel,

I trust this memorandum finds you well. I am writing to address some concerns that were highlighted
during our most recent parent-teacher meeting, which was conducted on January 10, 2016, on behalf
of the Parents-Teachers Association at DMP Academy. The primary topic of discussion concerned
our institution's instructor turnover rate.
a.​ Definition of Labour Turnover:
The rate at which workers leave an organization and must be replaced by new hires is known as labor
turnover, sometimes known as staff turnover or employee turnover. It is an important harbinger of
organizational stability and labor management. Labor turnover can be stated as a ratio or as a
percentage and is commonly computed as follows:
●​ Labor Turnover Rate = (Number of Employees Who Left / Average Number of Employees) x
100
Both voluntary and involuntary departures—such as retirements or resignations—are included in the
"number of employees who left" figure. (terminations or layoffs). Typically, the "average number of
employees" is determined by taking the average of all employees for a given duration.
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 6

A vital component of human resource management, labor turnover analysis can assist businesses in
pinpointing areas for development, putting retention plans into action, and keeping a happy and
productive workforce.
b.​ Current Labour Turnover Rate for DMP for the Year Ended 2015 and Comparison
with the Industry:
Here is the labor turnover rate calculation for DMP Academy for the year that concluded in 2015,
based on the data that you provided:
Number of teachers on January 1, 2015: 60
Number of teachers terminated during the period: 40
Number of teachers replaced during the period: 20
Labour Turnover Rate for DMP Academy:
Turnover Rate = (40 + 20) / 60
Turnover Rate = 60 / 60
Turnover Rate = 1
So, the turnover rate for the period ending December 2015 is 1, or 100% if you express it as a
percentage. The labour turnover rate for DMP Academy for the year ended 2015 was 100%. In
comparison to the industry average, which you mentioned is 4%, it is evident that our institution has
a significantly higher turnover rate.
c.​ Two Main Reasons for Employees Leaving the Institution:
The following explanations could explain DMP Academy's high staff turnover rate. Please note,
these are broad categories and that there can be exceptions in certain situations:
Inadequate Compensation:
●​ Lower salary packages compared to other educational institutions.
●​ Limited opportunities for salary growth and advancement.
●​ Insufficient benefits and incentives for staff.
Lack of Professional Development:
●​ Limited access to training and professional development opportunities.
●​ Inadequate support for career growth and skill enhancement.
●​ A perception of stagnation and lack of career progression.
d.​ Two Main Costs Associated with High Labour Turnover:
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 7

A high employee turnover rate can damage DMP Academy's in a number of ways. The following are
the two primary cost categories:
Recruitment and Onboarding Costs:
●​ Expenses associated with advertising job vacancies and recruitment processes.
●​ Costs for conducting interviews, background checks, and reference verifications.
●​ Costs related to new hire orientation and training.
Productivity and Knowledge Loss:
●​ Decreased productivity as new employees may require time to become fully effective.
●​ Loss of institutional knowledge and experience.
●​ Negative impact on the quality of education and student outcomes due to constant changes in
staff.
Although we acknowledge that DMP Academy is not a government-run school, Mrs. Powel, we
believe that addressing these concerns can help mitigate the high turnover rate and improve the overall
quality of education provided by our institution. We would appreciate the opportunity to further
discuss these issues and collaborate on solutions that benefit both the teachers and the students.
Thank you for your attention to this matter, and we look forward to a constructive dialogue to address
these concerns.

Sincerely,
Group 2
President, Parents-Teachers Association
DMP Academy
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 8

Question 3

Pt. A
OVERHEAD ANALYSIS SHEET

Overhead Basis A B C Main Stores Total

Indirect $ $ $ $ $ $
Labour Allocated 1,500,000 1,125,000 1,875,000 600,000 750,000 5,850,000

Indirect $ $ $ $ $ $
Materials Allocated 450,000 ​ 1,125,000 900,000 1,050,000 3,900,000
375,000

Other $ $ $ $ $ $
Expenses Allocated 1,800,000 1,500,000 ​ 300,000 1,200,000 5,550,000
750,000

$ $ $ $ $ $
Sub-Total 3,750,000 3,000,000 3,750,000 1,800,000 3,000,000 15,300,000

Using simultaneous equations: Therefore:

Let M = Maintenance Eq (1) M = $ 1,800,000 + 10% S

Let S = Istores Eq (2) S = $ 3,000,000 + 20% M

Using Eq (1) : and sub Eq (2) into Eq (1) Sub M into

Eq(2)

M = 1,800,000 + 0.10 [3,000,000 + 0.20 M] S = 3,000,000 + 0.20 S

M = 1,800,000 + 300,000 + 0.02S S = 3,000,000 + 0.20

(2,142,857.142)

M - 0.02S = 1,800,000 + 300,000 S = 3,000,000 + 428,571.43

M = 0.98S = 2,100,000 S = $ 3,428,571.43

 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 9

Using simultaneous equations: Therefore:

M = 2,100,000/ 0.98

M = $ 2,142,857.142

Pt. B
Basis A B C Main Stores Total

Sub-Total $ $ $ $ $ $
3,750,000 3,000,000 3,750,000 1,800,000 3,000,000 15,300,000

Main 20%,40%, $ $ ​ $ ​ $ $ $
20%, 20% 428,571 857,143 428,571 (2,142,857) 428,571 ​ -

Stores 50%,20%, $ $ ​ $ ​ $ $ $
20%, 10% 1,714,286 685,714 685,714 342,857 (3,428,571) ​ -

Total $ $ $ $ $ $
Budgeted 5,892,857 4,542,857 4,864,286 ​ (0) ​ 0 15,300,000
O/H

Labour ​
Hours 900,000
dlh

Machine
Hours ​ ​
225,000 375,000
mhrs mhrs

OAR $ $ $ ​
​ 20.19 12.97
6.55

per per per mhrs.

dlhrs. mhrs.

Pt. C
DEPT A DEPT B DEPT C
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 10

Actual O/H $ ​ $ ​ $ ​
4,500,000 3,000,000 3,375,000

O/H Absorbed (OAR x Actual ($6.55 x ($20.19 x ($12.97 x

Activity) 750,000) 300,000) 450,000)

​ ​ ​
4,912,500.00 6,057,000.00 5,836,500.00

(Over)/Under $​ $​ $​
Absorbed (Actual (412,500.00) (3,057,000.00) (2,461,500.00)
O/H - O/H Absorbed)
OVER OVER OVER

Pt. D
What are the two main factors that give rise to over/under absorption of overheads?​​ ​
​
1.​ The actual activity is different from the budgeted activity.​ ​ ​
2.​ The actual overhead costs are different from budgeted overheads. ​​ ​ ​
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 11

Question 4

Marginal Income Statement 2022

Sales (200x130000) $
26,000,000.00

Less: Variable Cost

Opening Inventory (63x15000) $ ​

945,000.00

Variable Cost of production (63x160,000) $

10,080,000.00

Variable Selling and distribution (12x130,000) $

1,560,000.00

Less: Closing Stock (63x45,000) $ $

(2,835,000.00) (9,750,000.00)

CONTRIBUTION $
16,250,000.00

Less: Fixed Costs

Fixed Overheads $
(1,700,000.00)

Profit Loss $
14,550,000.00
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 12

Absorption Income Statement 2022

Sales (130,000x200) $
26,000,000.00

Cost of gold sold

Opening Inventory (66x15,000) $ ​

990,000.00

Variable Cost of product (63x160,000) $

10,080,000.00

Fixed Overhead absorbed (3x160,000) $ ​

480,000.00

Goods Available for Sale $

11,550,000.00

Less Closing Inventory (45,000x66) $

(2,970,000.00)

Cost of Goods Sold $

8,580,000.00

Add: Under absorption $ $

1,220,000.00 (9,800,000.00)

Gross Profit $
16,200,000.00

Less: Non-production costs

Variable selling (130,000x12) $

(1,560,000.00)

Profit/Loss $
14,640,000.00
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 13

Reconciliation 2022

Marginal Costing profits $

14,550,000.00

Increase in inventory (30,000x3) $ ​

90,000.00

Absorption costing profits $

14,640,000.00

Marginal Income Statement 2023

Sales (150,000x200) $
30,000,000.00

Less: Variable Cost

Opening Inventory (45,000x63) $

2,835,000.00

Variable Cost of production (160,000x63) $

10,080,000.00

Variable Selling and distribution (12x150,000) $

1,800,000.00

Less: Closing Stock (63x55,000) $ $

(3,465,000.00) (11,250,000.00)

CONTRIBUTION $
18,750,000.00

Less: Fixed Costs

Fixed Overheads $
(2,300,000.00)

Profit Loss $
16,450,000.00
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 14

Absorption Income Statement 2023

Sales (150,000x200) $
30,000,000.00

Cost of gold sold

Opening Inventory (66x45,000) $

2,970,000.00

Variable Cost of product 63x160,000 $

10,080,000.00

Fixed Overhead absorbed (3x160,000) $ ​

480,000.00

Goods Available for Sale $

13,530,000.00

Less Closing Inventory (55,000*66) $

(3,630,000.00)

Cost of Goods Sold $

9,900,000.00

Add: Under absorption $ $

1,820,000.00 (11,720,000.00)

Gross Profit $
18,280,000.00

Less: Non-production costs

Variable selling (150,000x12) $

(1,800,000.00)

Profit/Loss $
16,480,000.00
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 15

Reconciliation 2023

Marginal Costing profits $

16,450,000.00

Increase in inventory (10,000x3) $ ​

30,000.00

Absorption costing profits $

16,480,000.00

OAR= Budgeted Fixed Overhead Cost/Budgeted Activity: 1,200,000/400,000=$3

Overhead absorbed= OARxActual Activity

2022 2023

Fixed Overhead Absorbed (3x160,000) ​ 480,000

480,000.00

Actual Fixed Overheads ​ ​

(1,700,000.00) (2,300,000.00)

Under-absorbed ​ ​
(1,220,000.00) (1,820,000.00)
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 16

2022 2023

Direct Material per unit 25 25

Direct Labour per unit 15 15

Direct Expenses per unit 10 10

Variable Overheads per unit 13 13

Total Variable Costs per unit 63 63

2022 2023

Opening Inventory ​ ​
(15,000.00) (45,000.00)

Closing Inventory ​ ​
45,000.00 55,000.00

Increase in inventory ​ ​
30,000.00 10,000.00
 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 17

Question 5
Part Ai)

Input 25,000 units

Normal loss (10%*25,000) 2,500 units
Expected output 22, 500

ii)

Expected output 22, 500 units

Actual output 23, 250 units
Abnormal gain 750 units

Expected output 22, 500 units

Actual output 22, 000 units
Abnormal loss 500 units

iii) Cost unit is defined as the unit of product, service, time, activity, or combination in relation to which
cost is estimated.

Part B)
If output was 23,250:

Normal loss scrap value

=2,500× $5.40
= 13,500

Cost per unit=

(427,500- 13,500)/ 22,500
=$18.4 per unit

If output was 22,000

 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 18

Normal loss scrap value

=2,500× $5.40
= 13,500

Cost per unit=

(Cost incurred-scrap value)/ Expected output
=(427,500- 13,500)/ 22,500
=$18.4 per unit

ii) For 23, 250:

Output (23,250*$18.4) $ 427, 800
Normal loss (2,500*$5.40) $ 13, 500
Abnormal gain ( 750× 18.4) $ (13, 800)
427,500

For 22,000:
Output (22,000*$18.4) $ 404, 800
Normal loss (2,500*$5.40) $ 13, 500
Abnormal loss ( 500× 18.4) $ 9, 200
427, 500

C) Process account

Process Account (23, 250, Gain)

Units $ Units $

Cost Incurred 25, 000 427, 500 Normal loss 2,500 13,500

Abnormal gain 750 13, 800 Output 23, 250 427, 800

25, 750 441, 300 25, 750 441, 300

 Group Project, Semester 1, AY 2022-23​ ​ ​ ​ ​ 19

Process Account (22,000, Loss)

Units $ Units $

Cost Incurred 25,000 427, 500 Normal Loss 2,500 13, 500

Output 22, 000 404, 800

Abnormal 500 9,200

Loss

25, 000 427, 500 25,000 427, 500