Accounting management
Case Study: WINDCATCHER LTD

tufitri AIT ALI

Case Study: WINDCATCHER LTD
QUESTION N°1: Establish the essential cost of the order and state any assumptions that you have made in calculating this figure.
To calculate the total cost of the order, we have to measure direct labor cost, direct materials cost and manufacturing overhead cost related to the job order so: First step: Measuring Labor cost:

The manufacturing process was divided for supervisory purposes into three departments: the cutting shop, the machine shop and the inspection department.
In fact, there is another department concerning the offices where the secretarial and the accounting functions took place employed two part-time workers at annual salaries of £10,000 each during the forthcoming year. So, we consider the secretarial salaries as fixed cost because it doesn’t depend on the activity or the command.
We know that:
Annual salaries per department = number of workers per department * annual salaries per production worker | | Annual salaries per prod worker (£) | number of workers | Annual salaries per department (£) | cutting shop | 19800 | 3 | 59400 | machine shop | 18000 | 5 | 90000 | inspection shop | 21600 | 1 | 21600 | | | | | 171000 |

Cost per hour = Annual salaries per department / 1800.
PS: During the forthcoming year it was expected that each production worker would work for 1800 hours.
Total cost = Number of hours * cost per hour

| | Number of Hours | Cost per hour (£) | Total cost (£) | worker's production CS | 2 | 33 | 66 | worker's production MS | 3 | 50 | 150 | worker's production IS | 1 | 12 | 12 | 228 | Step 2: Material costs

One sail requires 5 square meters of sailcloth, costing £16.00 a square meter. Which means the batch of 20 sails will cost: | | Quantity (square meter) | Unit Cost (£) | Total Cost (£) |