Homework assignment 1: Bissur NV. In Tutorial Library

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TITLE: Homework assignment 1: Bissur NV.

CLASS / COURSE: Management Accounting

QUESTION DESCRIPTION:

Bissur NV is a Dutch manufacturing firm. In the year 2006 its revenues were 950 million Euros. From the accounting system of Bissur NV, it is clear that the company made the following costs in the year 2006:
 
Cost
(in millions of Euros)
Direct manufacturing labor 100
Indirect manufacturing labor 60
Plant supervisory salaries 5
Direct materials 325
Depreciation of plant building and equipment 80
Plant supplies used 10
Plant utilities 30
Plant overhead (miscellaneous) 35
Customer service and marketing 240
Furthermore, Bissur’s accounting system shows the following account balances:
Account Date Balance
(in millions of Euros)
Direct materials January 1, 2006 15
December 31, 2006 20
Work-in-progress January 1, 2006 10
December 31, 2006 5
Finished goods January 1, 2006 70
December 31, 2006 55
 
Required:
1. Prepare a schedule of the cost of goods manufactured in the year 2006.
2. Prepare an income statement for Bissur NV for the year 2006. Suppose that both the depreciation and the direct materials used were related to the manufacturing of 1 million units of product.
3. What is the unit cost for the direct materials assigned to those units? Continued on the next page
4. What is the unit cost for depreciation (assume that yearly plant depreciation is calculated on a straight line basis)? Suppose in the next year all costs would exhibit similar patterns. So direct materials costs would behave as a variable cost and depreciation would behave as a fixed cost. Now suppose that in the next year 1.2 million units of product are manufactured.
5. What would be the unit cost for the direct materials assigned to those units?
6. What would be the unit cost for depreciation?
7. Plant supervisory salaries are usually regarded as indirect manufacturing costs. Under what conditions might some of these costs be regarded as direct manufacturing costs?

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SUBJECTS / CATEGORIES:
1. Financial Management
2. Accounting

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