Professional Documents
Culture Documents
A Project On Determining The Cost of A Product and Variance Analysis
A Project On Determining The Cost of A Product and Variance Analysis
variance analysis.
Submitted to:
Sohanur Rahman
Lecturer
Department of Finance and Accounting
North South University
Submitted by
Dhruba Das
Sumaya
Ahmed
Chowdhury Md. Muin
1
Contents Page
Letter of Submission 3
Executive Summary 4
Business Card 5
Product Details 6
Production Process 7
Cost of The Product 8
Variance Analysis 11
Price and profit Margin 13
Contribution Margin and Break-even Point 14
Reference 15
2
Letter of Submission
19th April, 2019
Sohanur Rahman
Lecturer;
Department of Finance and Accounting
North South University;
Bashundhara, Dhaka-1229, Bangladesh.
Dear Sir,
Here is the project report that you asked us to submit which was regarding determining the cost
of a product and variance analysis.
This project report and the investigation behind it was prepared under your direct
supervision. We pledge that under no circumstance will any part of it be reproduced for
any reason, shared with anyone else, or uploaded to any Internet website without your
written consent. Furthermore, we pledge that this report has not been submitted to any
other faculty member of North South University.
First and foremost, we would like to thank Almighty for his blessings and guidance without
which we would not have been able to complete the project on time. We would also like to thank
our parents for always being there for us. For further assistance, we accessed the managerial
accounting book, lecture slides and most essentially lecture classes and also took an interview of
a coffee seller and came to understand many events in preparing this paper. Finally, special
thanks go to our teacher, Mr. Sohanur Rahman, who has guided us throughout the whole process
and without whom this would not have been possible. We are thankful to sir for giving us the
opportunity to work on this report, and for always being kind, cooperative and understanding in
all of our trying times.
Thank you, Sir.
Sincerely,
Name ID
Dhruba Das 1811744630
Sumaya Ahmed 1813033630
Chowdhury Md. Muin 1813251630
3
Executive Summary
Cold coffee is a very popular drinks in Bangladesh. It is a refreshing drink for people of every
age all around the year, in summer time the demand is the highest. This project is all about Md.
Shopon Mia’s Cold Coffee, a cold coffee shop situated at the end of the bailey road beside
Viqarunnisa Noon school and Siddeshwari Girls School and college in Siddeshwari, Dhaka. We
have prepared a projected contribution format income statement for the month of March, 2019
and an analysis of variance in standard and actual costs during the month of March, 2019. The
company is expected to make a net operating income of BDT 48,101.60 with a contribution
margin of BDT 63,101.60 and a profit margin of 41.11%. An unfavorable price variance of BDT
4,134.00 in the cost of raw materials and a labor rate variance of BDT 306.00 in the labor
variance was observed for the month of March, 2019. In this project we have also included
4
Business Card
5
Product Details
Product Name:
1. Chocolate Cold Coffee
Ingredients:
1. Milk
2. Sugar
3. Coffee Powder
4. Chocolate powder
5. Coffee Syrup
6. Coffee Mate
7. Ice
8. Disposable one-time cup
9. Tissue
10. Straw
Shopon Mia serves a chill zestful cup of cold coffee which comes in one flavors. The number of
coffee is served according to the demand of the customer, no pre stored coffee is sold.
Target Customer:
The coffee is targeted to be sold mainly to the students of Viqarunnisa Noon school and
Siddeshwari Girls School and college. Also customers of any age who is looking for a refreshing
quencher in an unfavorable tiring weather or in an evening hangout.
6
Production Process
Shopon Mia buys all the ingredients for the coffee production in bulk. Shopon Mia has to buy all
ingredients worth BDT 1,500 in total worth producing 65 Cups of coffee per day.
Shopon Mia manufactures each cup of coffee by blending milk with coffee powder and little
amount of coffee mate and then adds sugar to it. Then coffee syrup, coffee mate and chocolate
powder is added and mixed well with the milkshake. Then instantly served fresh with ice to
customers. Shopon Mia has his own coffee stall in bailey road.
7
Cost of the Product
Computing the product cost of the two product line of the company:
Direct Materials
Unit price
Average Cost Per Cost per
No. of Units (Per Unit)
No. of Month Product
Items Units Used Unit All
Days All Amounts All Amounts
(Per Day) Per Cup Amounts
Per Month are in BDT are in BDT
are in BDT
8
Computing Direct labor:
Md. Shopon Mia’s Cold Coffee
For the end of month of March
Direct Labor
No.
Unit price
of Average No. Cost Per Month Cost per Product
(Per Unit)
Items Units Unit of Days All Amounts are All Amounts are in
All
(Cup per Month in BDT BDT
Amounts
s
are in BDT
Per
Day)
Salary of
Worker 65 1 10,000.00 30 10,000.00 5.12
Total 10,000.00 5.12
10
Variance Analysis
Computing Raw Material Variance:
In the month of March, the actual price of regular cold coffee is BDT 35.12 respectively whereas
the standard prices should have been BDT 33. The actual number of coffee production is same as
the standard number of coffee per month that is (65 cups of coffee per day x 30 days) or 1950
cups per month. After analyzing the price variance is BDT 4134 which is unfavorable and the
quantity variance is BDT 0 which is favorable.
11
Computing labor variance
In the month of March, the actual hours of labor making chocolate cold coffee is BDT 5.12
whereas the standard prices should have been BDT 4.1. The actual number of coffee production
is same as the standard number of coffee per month that is (65 cups of coffee per day x 30 days)
or 1950 cups per month. After analyzing the labor rate variance is BDT 306 which is unfavorable
and the labor efficiency variance is BDT 0 which is favorable.
12
Price and Profit Margin
Price of the products:
Computing Profit
margin Now computing net
income,
Md. Shopon Mia’s Cold Coffee
For the month ended of March,2019
Sales Revenue
Materials 43,898.40
13
Contribution Margin and Breakeven Point
Computing the net Operating Income
14
Reference
Garrison, R.H., Noreen, E.W., & Brewer, P.C. (2015). Managerial Accounting (15th
ed.). New York, NY: McGraw-Hill Education.
15