Chapter 1

Chapter 1: Standard or Pre-established Costs

Synthesis exercises
Exercise No. 1: Saule Company

The company Saule manufactures a product called 'Plastinet' that is sold to

of large surfaces and large stores, in the form of aerosols of a
volume of 500 ml.
The information necessary for management control is grouped here.
below:
The product is obtained by using a mixture of cleaning liquid and
propellant gas, commonly referred to as 'the juice', purchased and stored in
tanks. With the drum filled and after stamping, a cap and a
spray nozzle are added. The cap and the nozzle form a
supplies whose consumption is included in the total of
charges of the Emboutissage center, center where the 500 cans are
ml are filled;
Pre-established data concerning only the product 'Plastinet':
• Normal production: 20,000 aerosols
• Normal activity: 1,240 units of work (UO).
• Consommations : Jus : 3 000 DH− Bidons : 7 000DH.
• Direct labor: 17,700 DH. An aerosol requires four
direct labor minutes.
• Stamping center: 5,300 DH, including 3,410 DH of fixed charges.
TAF
Present, based on the appendix, the standard unit cost sheet.
(pre-established) of the aerosol 'Plastinet'.

Exercise No. 2: SLEA Company

The company SLEA specializes in the manufacture of equipment.

measurement electronics, by assembling different components purchased from
the outside.
a. For the two most common models, (M1 and M2) the nomenclature
the components (C1, C2, C3, C4) used are as follows.
M1 M2 See you
C1 1 1 150
C2 - 2 20
C3 3 2 40
C4 1 2 100

After assembly, the devices are subjected to a check in a workshop.

specialized.
b. The manufacturing ranges provide for direct labor times
necessary in the assembly center:

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M1 M2
Assembly 0.5 h 0.7 h

The hourly rate of direct labor is to be determined from the

the following elements: three people work in the assembly workshop and
are paid based on a gross monthly salary of 2400 DH (for 35
weekly hours) to which 48% of charges should be added
patronal.
Employees are entitled to six weeks of paid leave.
The employment rate of the workforce is defined as the ratio: time
productive/ presence time; it is equal to 0.9.
c. The budgeted indirect costs for the year and the nature of the units
The works are given in the table below:
Assemblage Control
Total charges 350,000 400,000
Work units Labor hour Controlled component
Normal capacity To be determined 40000 components

TAF :
Present the standard unit cost sheets (pre-established) of products M1
and M2.
Exercise No. 3: ST Company

The ST company is the subcontractor for several large companies.

for the manufacturing of two types of household appliances A and B.
These two types of devices are assembled in the assembly workshop, from
of three components each, developed in the manufacturing workshop, from
two raw materials Ml and M2.
This subcontracting company is required to monitor its costs accurately.
as well as to practice predictive management. This requires him to calculate some
established manufacturing costs (periodically adjusted) and thus to estimate the
cost of orders placed by the project management companies with
which she is working on.
The documents provided in the annex gather the information regarding the
final established costs calculated.
Annex 1
Pre-established manufacturing cost assessed from six months of observations
previous:
The assessment is based on a monthly production of 300 components C1, 200
C2 components, 250 C3 components:
Consumption of raw materials M1:
• C1: 840 kg for 1,176 DH
• C2: 640 kg for 896 DH
• C3: 750 kg for 1,050 DH

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Raw material consumption M2:

• C1: 900 kg for 1,440 DH
• C2: 800 kg for 1,280 MAD
• C3: 1410 kg for 2,256 DH
The manufacturing workshop costs are to be determined here considering the
budget of the indirect costs of this analysis center (see appendix 3).
Appendix 2
Pre-established cost of assembling products A and products B
Elements A B
Components C 1 1 unit 1 unit
Components C 2 1 unit 1 unit
Components C 3 1 unit 1 unit
Main direct 1.50 Hour 1.25 Hour
Labor Cost per Hour 10 DH 10 DH
Assembly workshop charges To be determined To be determined
(annex3)
Annex 3
Amounts of pre-established indirect costs provided in the budget of
production costs for normal activity.
Elements Fabrication Montage
Kg of material
Unit of work MOD time
first used
Unit variable charges 0.6 DH 5 DH
Fixed unit charges 1.40 DH 9 DH

1. Calculate the predetermined unit cost of C1, C2, C3, A and B.

2. Find the standard monthly budget for manufacturing centers and
the assembly, compatible with a production of 210 of product A
and 190 products B
What do you think about the observations made during the six months?
previously in the manufacturing workshop? to what extent are-
Are they relevant?

Exercice N° 4 : Société Vartin (Budget flexible et standard)

The manufacturing center of the company Vartin operates normally 8,000

hours per monthly period to manufacture 25,000 industrial parts.
The manufacturing cost of these parts is then 660,000 DH, of which a part
fixed at 160,000 DH.
These overhead costs are accepted in an activity bracket of 7,000 to 9,000.
hours. Beyond that, the structure of the manufacturing center should be modified by
a fixed cost supplement of 120,000 DH, and this would have the effect of

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reduce proportional costs by 4% (discounts granted by the

suppliers on purchasing materials in larger quantities.
This new structure would allow operation for up to 12,000 hours.
monthly.
TAF :
1. Présentez un budget flexible pour 7 000, 8 000, 9 000 et 10 000
Activity hours. Indicate, for each level of activity, the cost
of the unit of work broken down into variable costs and fixed costs
fixes.
2. Calculate the value of the predetermined cost for this center.
3. Indicate the budget equations based on activity on
each of the levels of fixed charges.
The company can exceptionally use its capacities.
subcontracted employees. Indicate the selling price per hour
billed to the subcontractor in the case of normal activity.
Note: the company takes a profit margin of 10% of the cost of
the time and these extra hours do not cause
additional fixed charges.

Exercice N° 5 : Société Électronix

The public limited company Électronix manufactures and sells two types of tubes.
electronics.
The manufacturing process of these tubes involves three stages.
- The 'assembly' stage, manual, consisting of 113 identical stations, with
a skilled worker per position using tools of original value
500 DH excluding tax, amortizable on a straight-line basis over 5 years.
The empty-closing stadium, heavily mechanized, consists of two machines.
identical, each served by two skilled workers; the value
The cost of a machine is 25,000 DH excluding tax; linear depreciation.
over 5 years.
- The conditioning stage, a purely manual stage related to packaging
tubes (packaged in cardboard). It has three positions.
The ranges of operations are as follows (these are the usage times)
or walking expressed in minutes and hundredths of minutes:
1 Tube X 1Tube Y
1 Montage 9.50 3.50
2 Video closing 0.09 0.06
3- Conditioning 0.10 0.10
The employment rate for manual positions (assembly and packaging) is 90%
during the time of presence, the employment rate of the vacant closing position is 80% of the
time of presence. Taking into account paid leave, public holidays, and non-working days,
The estimated time of presence is 45 weeks of 35 hours.
The costs of outgoing raw materials and supplies from stores
consumed are estimated at 3 DH excluding tax for a tube X and at 1 DH excluding tax for a

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tube Y. The exit costs of the used packaging are estimated at 0.45 DH excluding tax.
for a tube X and 0.25 DH excluding tax for a tube Y.

The cost of energy used for the machines in the empty-closure workshop is
evaluated at 20 DHHT per hour of employment.

The hourly rate for skilled workers is 10 E per hour of presence; the one
The handling workers of the packaging stadium earn 8 E per hour.
presence. We can estimate that the total social and tax charges
proportional amount is 50% of the gross salaries.
TAF :
1. Calculate the number of hours of employment and the cost per hour of employment
all charges included for each stage of production.
2. Establish the standard cost sheet for a tube X and a tube Y.

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