Group Project

ACT 202: Introduction to Managerial Accounting

Project on “Determining the Cost of a Product and
Variance Analysis”
Date of submission: 19th April 2022
Section: 9 (Spring 2022)

SUBMITTED TO
MOHAMMED GOLAM RABBANI
Department of Accounting & Finance (DAF)
School of Business and Economics
North South University

Prepared by
Name ID
Sadia Rahman Supti 1921229030
Shazid Hossain 1931028030

Nadira Akter Joiya 2012073030

Tanvir Islam 2014054030
Afia Azad Hridita 2111622630

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 MEAN
VARIANCE
ANALYSIS
OF “THE
KITCHEN
2020”

2|Page
 Letter of Submission

19 April, 2022
Mohammad Golam Rabbani
Lecturer
Department of Accounting
School of Business and Economics
North South University

Subject: Submission of Group report on The Kitchen

Dear Sir,
It’s a pleasure for all of us to be able to Submission of the report on computing the cost of
production, variance analysis and the master budgeting of The Kitchen restaurant.
We have tried our level best to show the accurate calculations within the timeframe. This
report is fully based on our experience, skill and practices that we have gained in the
period of this course (Act202_ Introduction to Managerial Accounting)
Thank you, sir from the bottom of heart and also grateful that you gave us the opportunity
to work on this report. We hope that, this report meets all the requirements you want.
Sincerely,

Sadia Rahman Supti_1921229030

Shazid Hossain_1931028030
Nadira Akter Joiya_2012073030
Tanvir Islam_2014054030
Afia Azad Hridita_2111622630

Section-9
Spring 2022

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 Executive Summary

This group report is based on determining the cost of product. We choose Spicy Thai Chicken
fry as our product from The Kitchen Restaurant. The Kitchen is a fast food shop in Bangla
Motor, Dhaka. They targeted all ages people because every people love fast food items. We
conducted an interview with its owner and collected information regarding an item, chicken fry.
This report mainly focuses on their production process and their production cost. We also
calculated variance (raw material, labor, manufacturing overhead) of the product. Moreover, we
calculated the product cost, break even analysis and profit margin of the corner. Besides we
constructed a master budget of the product that includes the sales budget, expected cash
collection and the product budget. Along with that direct materials budget, schedule of expected
cash disrobements, manufacturing overhead and selling and administrative expense budget are
also visualized in the master budget. In the end, we calculated cash budget, budgeted income
statements and balance sheet.

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Table of Contents

Topic Page no.

Cover Page 1
Title Page 2
Letter of Submission 3
Executive Summary 4
Product Detail 6
Production Process 6
Cost of the product 8
Income Statement 9
Profit Margin 9
Contribution Margin, Breakeven Point, Breakeven revenue 9
Variance 10
Master Budgeting  
Sales Budgeting 13
Cash Collection Budget 13
Production Budget 14
Direct Material Budget 15
Cash Disbursement Budget 15
Direct Labor Budget 16
Manufacturing Overhead Budget 17
Ending Inventory Budget 18
Selling and Administrative Budget 19
Cash Budgeting 20
Budgeted Income Statement 21
Budgeted Balance Sheet 21
Reference 22

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Product details
Product Name: Spicy Thai Fried Chicken
Sold units (March): 3000 Units (Approx.) (including direct sells and via food panda)
Year of Operation: 2022
Type of Product: Chicken cooked using Chinese recipe
Direct Material: Chicken, Spices (includes: chili, garlic, turmeric, gram flour etc.), Mayonnaise,
Tomato ketchup, additional vegetables as salad.
Direct Labor: The chef who cooks
Manufacturing overhead: The kitchen supervisor’s salary, kitchen cleaning and maintenance
cost, Utility bills (gas, electricity), Rent.
Selling expenses: Marketing via Facebook, leaflets.
Administrative expenses: Salary of the manager, waiters.

Production Process:
Write a random Thai chicken recipe.

Cost of products:
Direct Materials (per unit)
Chicken: 70 Tk
Spices: 20 Tk
Mayonnaise: 3 Tk
Tomato Ketchup: 2 Tk
Salad: 10tk

Direct Labor:
Chef salary: 15,000Tk per month

Manufacturing overhead:
Variable manufacturing overhead:

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Utility Expenses: 10,000 per month
Fixed MOH:
Rent: 20,000
Supervisor’s salary: 10,000
Cleaning cost: 3000

Selling expenses:
Facebook ads: 450 tk per month
Leaflet ads: 200 tk per month

Administrative expenses:
Manager’s salary: 15000 tk per month
Waiters’ salary: 10000 tk per month combined

Production details

Thai chicken is cooked in a Chinese recipe. The chicken is marinated with all the spices, boiled
and cooked well. The chef mainly cooks this dish. There are workers who clean the kitchen after
and before cooking. Utility expense is variable, as more chicken is cooked, more gas and
electricity are used. There is a supervisor, who monitors this entire cooking process.
Advertisements are often done on fb and leaflets are shared. The administration would include
the manager, who also works as the cashier and the waiters who serve the food when it is not
ordered via food panda.

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Cost of Product

Direct material BDT

Chicken 70
Spices 20

Mayonnaise 3

Tomato Ketchup 2

   

Salad 10

Total direct material per unit 105

   
Direct labor BDT
Chef Salary 15000
Direct labor per unit (15,000/3,000) 5

   
Manufacturing overhead BDT
Variable MOH  
Utility expenses (10,000/3000) 3.33
Fixed MOH  
Rent (20,000/3000) 6.67
Supervisor Salary (10,000/3000) 3.33
Cleaning Cost (3000/3000) 1
Total MOH per unit 14.33
   
Total Manufacturing cost per unit (105+5+14.333333) 124.33
   
Selling price per unit 169.00

Income Statement
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Account BDT BDT
Sales (169x3000) 507000  
Less: Total Variable expenses (113.3333x3000) 340000  
Contritution Margin   167,000.00
Less: Fixed cost:    
Fixed MOH:    
Rent 20000  
Supervisor Salary 10000  
Cleaning cost 3000  
Total Manufacturing overhead   33000
Selling expenses:    
Facebook Ads 450  
Leaflet Ads 200  
Total Selling expenses   650
Administrative expenses:    
Manager's salary 15000  
Waiters' salary 10000  
Total Administrative expenses   25000
Total Selling and administrative expenses   25650
Total Fixed Expenses   58,650
     
Operating income   108,350.00

Profit margin   21%

     
Breakeven point in unit sales   1,053.59
     
Breakeven Revenue   178057.1856

Contribution Margin per unit   55.67

     
Contribution margin Ratio   33%

Material Variance

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 Standard price= 400/kg

Standard quantity= 700 kg

Actual price= 395/kg

Actual quantity= 715 kg

Material price variance= Material Quantity variance=

 

AQ(AP-SP) SP (AQ-SQ)
     

= 715 (395-400) = 400 (715- 700)

     

= -3,575 = 6,000
         

= 3,575F =6,000U
       

Total variance= 2,425F

Direct labor variance

 

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 Standard rate = 20 taka/per hour

Standard hour= 620 hour

 

Actual rate= 20.5 tk/hour

 

Actual hour= 630 hour

 

Labor rate variance= Labor efficiency variance=

 

AH(AR-SR) SR(AH-SH)
     

= 630 (20.5-20) = 20(630-620)

     

=315U =200U
         

Total variance= 515U

Variable Manufacturing Overhead Variance

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 Standard rate= 3/ hour
     

Standard hour= 620 hour

     

Actual rate= 3.4/hour

     

Actual hour= 630 hour

     

Variable MOHR rate variance= Variable MOHR efficiency variance=

AH(AR-SR) SR(AH-SH)
       

= 630 (3.4-3) = 3(630-620)

       

=252U = 30U
           

Total variance= 282U

Master budgeting:

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Sales Budget:

March 22 and April 23’s projected sales unit is 3000.

Apr Ma Jun Jul- Aug Sep Oct Nov Dec Jan Feb Ma Tota
  -22 y-22 -22 22 -22 -22 -22 -22 -22 -23 -23 r-23 l
Budge
ted
Sales 250 350 300 400 350 350 300 350 400 350 300 350 4050
Units 0 0 0 0 0 0 0 0 0 0 0 0 0
Selling
price
per
unit 169 169 169 169 169 169 169 169 169 169 169 169 169
Total 422 591 507 676 591 591 507 591 676 591 507 591 6844
Price 500 500 000 000 500 500 000 500 000 500 000 500 500

Cash Collection Budget

As all transactions are done in cash in full there was no account receivable.

Ma Au Ma
Apr y- Jun Jul- g- Sep Oct Nov Dec Jan Feb r- Tota
  -22 22 -22 22 22 -22 -22 -22 -22 -23 -23 23 l
Total Cash 422 591 507 676 591 591 507 591 676 591 507 591 6844
Collection 500 500 000 000 500 500 000 500 000 500 000 500 500

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The Production Budget

The restaurant wants the ending inventory to be equals to 10% of following month's budgeted sales
in units and beginning inventory was 250.

Ap Ma Ju Au No De Fe Ma
r- y- n- Jul g- Sep Oct v- c- Jan b- r- Tota
  22 22 22 -22 22 -22 -22 22 22 -23 23 23 l
250 350 300 400 350 350 300 350 400 350 300 350 4050
Budgeted Sales 0 0 0 0 0 0 0 0 0 0 0 0 0
Add: Desired
ending
inventory 350 300 400 350 350 300 350 400 350 300 350 300 300
285 380 340 435 385 380 335 390 435 380 335 380 4080
Total Needs 0 0 0 0 0 0 0 0 0 0 0 0 0
Less:
Beginning
inventory 250 350 300 400 350 350 300 350 400 350 300 350 250
Required 260 345 310 395 350 345 305 355 395 345 305 345 4055
Production 0 0 0 0 0 0 0 0 0 0 0 0 0

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Direct Material Budget

Beginning inventory in march was 90.6875.

10% of following month's production needs are in ending inventory.
April 31's required production was 950

Ma Ju Au Se Oc No Ja Fe Ma
Apr- y- n- Jul g- p- t- v- Dec n- b- r-
  22 22 22 -22 22 22 22 22 -22 23 23 23 Total
Productio 345 310 395 350 345 305 355 395 345 305 345
n 2600 0 0 0 0 0 0 0 0 0 0 0 40550
Materials
Per unit 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
(kgs) 0.25 5 5 5 5 5 5 5 0.25 5 5 5 0.25
Productio 862 987 862 762 887 987. 862 762 862 10137
n Needs 650 .5 775 .5 875 .5 .5 .5 5 .5 .5 .5 .5
Add:
Desired
ending 86.2 77. 98. 87. 86. 76. 88. 98. 86.2 76. 86.
inventory 5 5 75 5 25 25 75 75 5 25 25 95 95
Total 736. 873 107 961 938 851 986 107 938 848 957 10232
Needed 25 940 .75 5 .25 .75 .25 .25 3.75 .75 .75 .5 .5
Less:
Beginning 90.6 86. 77. 98. 87. 86. 76. 88. 98.7 86. 76. 86. 90.68
inventory 875 25 5 75 5 25 25 75 5 25 25 25 75
Materials
to be 645. 853 796 976 873 852 897 852 772 871 10141
purchased 5625 .75 .25 .25 .75 .5 775 .5 975 .5 .5 .25 .8125
Material
price per
kg is 420 420 420 420 420 420 420 420 420 420 420 420 420

All of the material is paid on cash so there's no accounts payable or liability to supplier.

Ma Au No Ma
Apr- y- Jun Jul g- Sep Oct v- Dec Jan Feb r-
  22 22 -22 -22 22 -22 -22 22 -22 -23 -23 23 Total
Total
Cash
disburs 2711 358 334 410 366 358 325 376 409 358 324 365 42595
ement 36.25 575 425 025 975 050 500 950 500 050 450 925 61.25

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Direct Labor Budget

Producing each unit of chicken fry takes 20 minutes, which is 0.25 hours.
The company has a no layoff policy and the chef gets paid on a monthly basis. Their labor rate is
20.5 taka per hour.
Guaranteed labor hours 420 hours
The minimum wage is 15000.

A
pr Ma Ju Au
- y- n- Jul- g- Sep Oct Nov Dec Jan Feb Ma Tota
  22 22 22 22 22 -22 -22 -22 -22 -23 -23 r-23 l
Units of
predictio 26 345 310 395 350 345 305 355 395 345 305 345 4055
n 00 0 0 0 0 0 0 0 0 0 0 0 0
Direct
labor
hour per 0. 0.2 0.2
unit 25 0.25 5 0.25 5 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
Labor
Hours 65 862. 987. 862. 762. 887. 987. 862. 762. 862. 1013
required 0 5 775 5 875 5 5 5 5 5 5 5 7.5
Guarante 42
ed labor 0 420 420 420 420 420 420 420 420 420 420 420  
Labor
hours 65 862. 987. 862. 762. 887. 987. 862. 762. 862. 1013
paid 0 5 775 5 875 5 5 5 5 5 5 5 7.5
Hourly
wage 20 20. 20.
rate .5 20.5 5 20.5 5 20.5 20.5 20.5 20.5 20.5 20.5 20.5 20.5
Total
Direct 13 176 158 202 179 176 156 181 202 176 156 176 2078
labor 32 81.2 87. 43.7 37. 81.2 31.2 93.7 43.7 81.2 31.2 81.2 18.7
cost 5 5 5 5 5 5 5 5 5 5 5 5 5

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Manufacturing overhead budget

Variable Manufacturing Overhead rate is 3.33.

Fixed Manufacturing overhead is 33000.
There are no non cash disbursements.

Ap Au
r- May Jun Jul- g- Sep- Oct- Nov Dec- Jan- Feb- Mar Tota
  22 -22 -22 22 22 22 22 -22 22 23 23 -23 l
Budge
ted 862. 987. 862. 762. 887. 987. 862. 762. 862. 1013
DLH 650 5 775 5 875 5 5 5 5 5 5 5 7.5
Variab
le
mfg.
OH 3.3
rates 3 3.33 3.33 3.33 3.33 3.33 3.33 3.33 3.33 3.33 3.33 3.33 3.33
Variab
le
mfg. 287 295 328 287 287 3375
OH 216 2872 258 3288 291 2.12 2539 5.37 8.37 2.12 2539 2.12 7.87
costs 4.5 .125 0.75 .375 3.75 5 .125 5 5 5 .125 5 5
Fixed
mfg.
OH 330 3300 330 3300 330 330 3300 330 330 330 3300 330 3960
costs 00 0 00 0 00 00 0 00 00 00 0 00 00
Total
mfg. 351 3587 355 3628 359 358 3553 359 362 358 3553 358 4297
OH 64. 2.12 80.7 8.37 13.7 72.1 9.12 55.3 88.3 72.1 9.12 72.1 57.8
costs 5 5 5 5 5 25 5 75 75 25 5 25 75
Non-
Cash
Costs 0 0 0 0 0 0 0 0 0 0 0 0  
Cash
Disbur
semen
ts for
Manuf 351 3587 355 3628 359 358 3553 359 362 358 3553 358 4297
acturin 64. 2.12 80.7 8.37 13.7 72.1 9.12 55.3 88.3 72.1 9.12 72.1 57.8
g OH 5 5 5 5 5 25 5 75 75 25 5 25 75

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Ending inventory budget

Total manufacturing overhead for the year 429757.875

Total labor hour required 10137.5
Manufacturing overhead rate 42.39288533

Direct materials (0.25 * 420)   105

Direct labor (0.25 * 20.5)   5.125

Manufacturing overhead (42.392285 * 0.25)   10.59822133

Unit product cost   120.7232213

   

Budgeted Finished goods inventory    

Ending inventory in units   300

unit product cost   120.7232213

Ending finished goods inventory   36216.9664

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Selling and administrative expense budget

We have no variable and non-cash selling and administrative expenses

Ma
Apr y- Jun Jul- Aug Sep Oct Nov Dec Jan Feb Ma Tota
  -22 22 -22 22 -22 -22 -22 -22 -22 -23 -23 r-23 l
Variable
selling
and
administr
ative
expenses 0 0 0 0 0 0 0 0 0 0 0 0  
Fixed
Selling
and
administr
ative 256 256 256 256 256 256 256 256 256 256 256 256 3078
expenses 50 50 50 50 50 50 50 50 50 50 50 50 00
Noncash
Expenses 0 0 0 0 0 0 0 0 0 0 0 0  
Total
Selling
and
administr
ative 256 256 256 256 256 256 256 256 256 256 256 256 3078
expense 50 50 50 50 50 50 50 50 50 50 50 50 00

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Cash Budgeting

Ap Ma Ju Au Ma
r- y- n- Jul- g- Sep Oct Nov Dec Jan Feb r- Tot
  22 22 22 22 22 -22 -22 -22 -22 -23 -23 23 al
Begin
ning
cash 280 560 1,09 1,28 1,43 1,5
balanc 50, 127, ,94 376, ,19 705, 859, 964, 8,89 3,21 7,46 43, 50,0
e 000 224 6 403 6 219 466 146 6 4 1 191 00
Total
cash 684
collect 422 591 507 676 591 591 507 591 676 591 507 591 450
ion 500 500 000 000 500 500 000 500 000 500 000 500 0
Total
cash 472 787 1,05 1,1 1,29 1,36 1,55 1,77 1,87 1,94 2,1 6,89
availa ,50 718, ,94 2,40 51, 6,71 6,46 5,64 4,89 4,71 4,46 34, 4,50
ble 0 724 6 3 696 9 6 6 6 4 1 691 0
Less:
Direct 271 425
materi 136 358 334 410 366 358 325 376 409 358 324 365 956
al .25 575 425 025 975 050 500 950 500 050 450 925 1.25
176 158 202 179 176 156 181 202 176 156 176 207
Direct 133 81.2 87. 43.7 37. 81.2 31.2 93.7 43.7 81.2 31.2 81. 818.
Labor 25 5 5 5 5 5 5 5 5 5 5 25 75
Manuf
acturi
ng 351 358 355 362 359 358 355 359 362 358 355 358 429
overhe 64. 72.1 80. 88.3 13. 72.1 39.1 55.3 88.3 72.1 39.1 72. 757.
ad 5 25 75 75 75 25 25 75 75 25 25 125 875
Sellin
g and
admin
istrati
ve
expen 256 256 256 256 256 256 256 256 256 256 256 256 307
se 50 50 50 50 50 50 50 50 50 50 50 50 800
Total 520
disbur 345 437 411 492 446 437 402 456 491 437 401 445 493
semen 275 778. 543 207. 476 253. 320. 749. 682. 253. 270. 128 7.87
t .75 375 .25 125 .25 375 375 125 125 375 375 .38 5
Endin
g cash 127 376 705 1,09 1,28 1,43 1,54 1,6 168
balanc ,22 280, ,40 560, ,21 859, 964, 8,89 3,21 7,46 3,19 89, 956
e 4 946 3 196 9 466 146 6 4 1 1 562 2

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Total sales 40500

Budgeted Income statement

Account Amount

Sales budget (40,500×169) 6844500

Cost of goods sold (40,500×120.72322) 4889290.46

Gross margin 1955209.54

Selling and administrative expense 307800

Net income 1647409.54

Budgeted Balance sheet

Account Amount
Assets:  
Cash 1,689,562
Accounts receivable 0
Raw materials inventory 362250
   
Total Assets 2,051,812
   
   
Liabilities and stockholder's equity  
Accounts payable 0
Common stock equity 0
Retained earnings 2,051,812
Total liability and stockholder's equity 2,051,812

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References:
1. Information collected from the manager of The Kitchen2020.
2. Facebook Page link: https://www.facebook.com/kitchenthe
3. A business card of this restaurant:

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