Accounting for Decision Making

Case Study Report Delaney Motors

Student Name: Ezra Low

Student ID: 110124948
Facilitator: Dr Bruce Gurd

Topic 6 Understanding Costs

Case study: Delaney Motors

Learning outcomes
knowledge
1. Distribution of Costs
I have learnt that distribution of
costs within a business is a vital
aspect of being able to analyse the
profitability of a department.
Distribution of costs needs to be
done in a fair manner so as
departments are being charged for
the appropriate costs.

2. Cost Pricing
I have learnt that profit calculation
is not always done at the end of an
accounting process, it can be done
during creation of a costing
method process. This was
represented as Delaney motors
was not making a viable profit in
his body shop. Mr Delaney needed
a correct pricing method, namely
the time and material pricing
structure as to ensure he made a
set profit for his operations in that
division. I have further learnt that
this process is achieved by: costing
the employees wages, adding
direct and indirect costs than
adding a profit margin (material
costs may be added to the invoice
as a separate charge).
3. Indirect and direct pricing
I have learnt that the cost of a
product or department, has both
direct and indirect costs. This

Application of
I work as an OH&S advisor in QLD
of a large corporation. This
corporation (Metcash) has four
different business divisions on the
site that I manage. Recently my
team supplied CPR and First Aid
training to 65 staff across the four
business divisions. Usually we cost
allocate this training to the main
business division being
supermarkets. Moving forward,
when we receive the invoice for
this training, I will code the
invoices so as to charge each of
the four divisions for the amount of
people that attended training. This
will provide a cost to each business
division for the CPR & First Aid
Training.
In my workplace the maintenance
team is costed out to relevant
divisions at a set hourly rate. This
represents an unfair charge to
some of the divisions, as some
departments utilise extensive
amounts of materials, and some
use none.
This should be changed as to not
include materials in their set hourly
rate.
We can achieve this time and
material pricing structure by
costing the hourly wages of the
maintenance team, adding indirect
costs, than adding the profit
margin the maintenance division
needs to make. After this,
materials are costed on the invoice
that is specific for that job.
Our business has a daily excel
report that generates direct and
indirect labour percentages. Our
business has a goal of 50% direct

means that there is a cost that can

be directly associated with the
product or department, and other
costs that are related but not
easily traceable to the product or
department.

labour. I now understand that

positions such as cleaners, fall
under this indirect labour cost.
Another example of an indirect
cost is the insurance on our
building. As I look after the
insurance audit on our building
(coming up on 30th July), I will now
take more care in trying to reduce
our premium, as this premium is
an indirect product cost to our
business.