Cost Accounting
COST ACCOUNTING
M.ASAD ABBAS PAF KIET
TABLE OF CONTENTS Executive Summary ......................................................................................................3
Introduction .....................................................................................................................4
Costing Strategy of Vesta Apparel.............................................................................5
Full Cost of the Primary Product ..............................................................................6
Facts and assumptions..................................................................................................7
Value Chain Activities ..................................................................................................8
Cost of Value Chain activity ......................................................................................10
Calculation of BEP, BER and Margin of safety .....................................................11
The figures at a glance..................................................................................................13
EXECUTIVE SUMMARY
T
he objective of this report was to find out about the costing method and value chain of Vesta Apparels Ltd and analyze its key indicators to determine the riskiness of the company. Through the project, we learnt that Vesta Apparels uses Job order costing method to determine the cost of the product. We calculated the full cost for the primary product of Vesta Apparels, which was found to be $22.26 including the profit margin. We also tried to find the per unit cost of each value chain activities, based on assumptions and estimations. We found out the BEP in units to be 115,285 units, and margin of safety to be 59,175 units. Using the calculation of Degree of Operating Leverage value, we identified the company as a risky one. We evaluated the present costing system, taking its
M.ASAD ABBAS PAF KIET
TABLE OF CONTENTS Executive Summary ......................................................................................................3
Introduction .....................................................................................................................4
Costing Strategy of Vesta Apparel.............................................................................5
Full Cost of the Primary Product ..............................................................................6
Facts and assumptions..................................................................................................7
Value Chain Activities ..................................................................................................8
Cost of Value Chain activity ......................................................................................10
Calculation of BEP, BER and Margin of safety .....................................................11
The figures at a glance..................................................................................................13
EXECUTIVE SUMMARY
T
he objective of this report was to find out about the costing method and value chain of Vesta Apparels Ltd and analyze its key indicators to determine the riskiness of the company. Through the project, we learnt that Vesta Apparels uses Job order costing method to determine the cost of the product. We calculated the full cost for the primary product of Vesta Apparels, which was found to be $22.26 including the profit margin. We also tried to find the per unit cost of each value chain activities, based on assumptions and estimations. We found out the BEP in units to be 115,285 units, and margin of safety to be 59,175 units. Using the calculation of Degree of Operating Leverage value, we identified the company as a risky one. We evaluated the present costing system, taking its