TASK 1

COST ESTIMATION ANALYZE

2.2 PRODUCT COST DEFINITION
There are 3 possible cost definitions were introduced to value-chain, operating,
manufacturing. Identify which of the three product cost definitions best fits the
following situations :
1. Setting The Price For New Product
The best cost definition is value-chain. This definition tells about :
the arrangement in making the product
contribution in making the product
how to make a pricing decision.
2. Valuing Finished Goods Inventories For External Reporting
The best cost is manufacturing. In this definition, the production process will
handled until the production process so we need to make the external report.
3. Determining Whether To Add A Complementary Product To The Product Line
We used the operating product. This cost definition tells about the strategic
design, analyzing of profitability of the complementary product.
4. Choosing Among Competing Product Design
We also used the operating cost definition in this situation. Because operating
product talked about how to observe all the design when we choose the
competing product design.
5. Calculating Cost Of Goods Sold For External Reporting
The best cost definition is manufacturing. In this cost definition, all the
information for external reporting will explain clearly.
6. Deciding Whether To Increase The Price Of An Existing Product
Value chain will be the right cost definition for this situation, because its
explain about product mix and pricing decision.
7. Deciding Whether To Accept Or Reject A Special Order, Where The Price
Offered Is Lower Than The Normal Selling Price
The cost definition will use is value chain, because tells about the profitability
for the company.
8. Determining Which Of Several Potential New Products Should Be Developed,
Produce And Sold

The best fit for this condition is value chain, because it is discuss about the
research and development in making decision.
9. Deciding Whether To Produce And Sell A Product Whose Design And
Development Costs Were Higher Than Budgeted
The best change for this condition is operation that helped us about strategic
design and profitability.

2-3 COST DEFINITION

Beginning inventory :
Direct material
Work in process
Ending inventory :
Direct material
Work in process
Direct material purchased
Direct labor cost

:
:

$ 50,800
$ 58,500

:
$ 21,500
:
$ 23,500
:
$ 150,000
:
$ 324,700
and 100,000 unit produce.

1. Total cost of direct material used in production

beginning direct material
:
$ 50,800
during year direct material purchased
:
$ 150,000
$ 200.800
ending direct material
:
$ 21,500
total cost of direct material used
:
$ 179,300

+
-

2. Cost of good manufactured, the unit manufactured cost

direct material used
direct labor

:
:

beginning work in process

ending work in process
cost of goods manufactured

Unit manufactured cost

= Cost of goods manufactured

total product
= $ 539,000
100,000
= $ 5.39

$ 179,300
$ 324,700 +
$ 504 ,000
:
$ 58,500 +
$ 562500
$ 23,500 $ 539,000

3. From calculation point b, assume $ 1.70 is direct materials in unit and $ 3.24 is
overhead. Prime cost per unit? Conversion cost per unit ?
Unit direct material
:
$ 1.70
Unit direct labor
:
$ 3.247 +
Prime cost per unit
:
$ 4.947
Unit overhead
:
Unit direct labor
:
Conversion cost per unit :

$ 3.24
$ 3.247 +
$ 6.487

2-3 COST OF GOODS AND MANUFACTURED SOLD

Information in the beginning of November :

Direct materials inventory :
$ 48,500
Work in process inventory :
$ 10,000
Finished goods inventory
:
$ 10,075

During November:
Direct labor cost
Direct material
Overhead cost

:
:
:

$ 22,000
$ 70,000
$ 216,850

In the end of November :

Direct material inventory
Work in process inventory
Finished goods inventory

:
:
:

$ 15,900
$ 6,050
$ 8,475

1. Cost of goods manufactured statement for November

direct material inventory (beginning)
:
direct material purchased during november
:
direct material inventory

work in process

work in process

direct labor

over head

$ 48,500
$ 70,000 +
$ 118,500
$ 15,900 $ 102,600
$ 10,000 +
$112,600
$ 6,050 $106,550
$ 22,000 +
$128,550
$ 216,850 +

Goods manufactured cost

$ 345,400

2. Cost of goods sold schedule for November

cost of goods manufactured

beginning finished goods inventory

:
:

ending finished goods inventory

$ 345,400
$ 10,075 +
$ 355,475
$ 8,475
-

cost of goods sold

$ 347,000

COST ESTIMATION ANALYZE TASK

BY :
YULIA AINIL WARDAH
1210932029

LECTURER
Alizar Hasan, PhD

INDUSTRIAL ENGINEERING
ANDALAS UNIVERSITY
PADANG
2014