Problem
Having completed Fundamentals of Cost Accounting class at NCU Class of 2019, Jim Brown was promoted to Chief Cost Analyst at ABC Electronics a medium sized air condition manufacturer. His first order of business was to devise a strategy to ensure that the cost of shipping Air conditions to customers could be easily ascertained and readily available to the CFO for prompt analysis and product pricing.
Jim has therefore put a team together with the aim of analyzing the cost behavior of the shipping Air Conditioning units.
The following data relating to units shipped and total shipping expenses were assembled by the team formulated by Jim Brown.
Total
Units Shipping
Month Shipped Expenses
January 200 $7,000
February 300 $8,000
March 400 $8,600
For output volumes above 320 units the variable cost per unit for shipping falls by 20%.
Task
Use the information above to assist Jim in computing the cost of shipping 450 air conditioning units.
A. Define using examples four ways in which cost may be classified.
B. Proper records must be kept of the physical procedures for ordering and receiving a consignment of materials to ensure the following.
a. That enough inventory is held
b. That there is no duplication of ordering
c. That quality is maintained
d. That there is adequate recordkeeping for accounts purposes
C. Explain the issue or issues that may arise as a result of a breach in each of the above reasons for keeping proper records.