Homework assignment 1: Bissur NV.

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?

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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?