The use of job costing as a tool for the pricing and cost control decisions in the printing industry: the case of Société de Presse et d'Editions (SOPECAM)

CHAPTER FOUR:

PRESENTATION AND ANALYSIS OF THE RESULTS

I. INTRODUCTION

The purpose of this chapter is to present and analyse the results of the studies conducted on the field. We will first give a rough presentation of the cost structure of SOPECAM for the newspaper Cameroon Tribune. Then, we will direct the study towards the determination of the weekly unit cost for the newspaper. These unit costs will then be analysed using the Student's -T-distribution.

II. SOPECAM'S COST STRUCTURE

First of all, it seems worthy to mention at this point that there are various processes necessary for the effective production of Cameroon Tribune.

These processes are:

· Editorial work; this is mainly done by the journalistic staff of the company.

· Pre-Printing works; it mainly consist in the preparation of the photographic sheets that will be used to print the newspaper.

· Factory or printing stage; this is the final stage in the production of the newspaper, as its name implies it is at this stage that the newspaper is printed and the pages are arranged following a certain order.

The various materials used in the manufacture of the newspaper are consumed at the various stages of the production process in addition to the labour provided by each employee of SOPECAM, particularly those of the editorial staff. Concerning the work of the other employees, the associated costs are charged to the unit cost of the newspaper following an allocation system based on the labour hours required for the production.

That system is the foundation of the determination of the unit cost currently used by the company; it is determined from an adapted «process costing» method in which various departments of the company have been allocated hourly rates as measure of their contribution to the unit cost of the newspaper. These rates are as follows:

Table 4-1 Hourly rates for the various departments

DEPARTMENT	PRE-PRINTING	SOAKING	COPY	PRINTING
Rate	6000F/hour	6000F/Hour	2500F/hour	45000F/hour
Number of Hours used everyday	8	3	2	3

Source: SOPECAM technical department

As it can be observed from the table, there is no information relating to the labour cost of the editorial staff, therefore, this will be one of the weaknesses of our research work as it could not have been possible for us to obtain data relating to that elements as a matter of confidentiality. Therefore we will have to make an estimate of these costs.

The editorial board of SOPECAM is made up of 12 journalists and secretaries whose work can be directly related to the newspaper. Their salaries can be distributed as follows:

Table 4-2 Editorial staffs salaries

TYPE OF EMPLOYEE	Number	Salary (monthly)	DAILY	Daily total
Secretaries	2	F 120 000	F 4000	F 8000
Journalists	5	F 240 000	F 8000	F 40 000
Senior journalists	3	F 300 000	F 10 000	F 30 000
Editor in chiefs	2	F 360 000	F 12 000	F 24 000

Source: the author

From the data obtained after the interview of the executives of the company, particularly the inventory department manager (annex1), the Manufacturing department manager and the head of the Accountancy and budget service, we have been able to determine the various raw materials that enter into the production of the newspaper, the hourly rates for the labour costs and information about the overhead costs incurred by the company. Normally, this study should be oriented towards the determination of the total unit cost of the company, that is the unit cost after having sold the newspaper as shown on the following diagram:

Figure 4-1 Unit cost determination scheme

Purchases

Determination of the purchase cost of raw materials

Stocks

Determination of the cost of materials used

Manufacturing

Determination of the Manufacturing cost

stocks

Determination of the cost of units sold

distribution

Total unit cost

Source^24(*): Fayel, A. & Pernot, D.,(2001) Comptabilité Génerale de l'Entreprise, 12th edition, Dunod, Paris.

Unfortunately, since there is no managerial accounting office in the company, it has not been possible to obtain figures relating to the allocation bases of these overheads; this shortage of information led us to estimate the expenses related to the selling and distribution and even administrative costs of the company.

As such we have the following data:

Table 4-3 Administrative and selling expenses

Type of expense	Monday	Tuesday	Wednesday	Thursday	Friday
Fixed selling	F 100 000	F 100 000	F 100 000	F 100 000	F 100 000
Variable selling	F 200 000	F 150 000	F 250 000	F 150 000	F 200 000
Fixed administrative	F 500 000	F 500 000	F 500 000	F 500 000	F 500 000
Variable administrative	F 250 000	F 300 000	F 350 000	F 250 000	F 200 000

Source: The author

We can then present the information relating to the materials used to produce the newspaper, they are:

Table 4-4 Materials used for the production

ITEMS	UNITS	UNIT COST	BEHAVIOUR
Direct materials
Paper	Spool	246 330 F	Variable
Black ink	Kg	10 000 F	Variable
Blue ink	Kg	10 000 F	Variable
Red ink	Kg	10 000 F	Variable
Yellow ink	Kg	10 000 F	Variable
Photographic sheet	Piece	25 000 F	Fixed
Photographic film	Roll	300 000 F	Fixed
Sheet Developer	Dose	198 000 F	Variable
Film developer	Dose	45 000 F	Variable
Film fixing liquid	Dose	45 000 F	Variable
Sheet proofreader	Bottle	10 800 F	Variable
Eraser	litre	8 000 F	Variable
Soaking solution	litre	6 000 F	variable
Sheet cleaner	Litre	15 600 F	Variable
Tracing paper	Ream	50 000 F	Variable
Photocopy paper A4	Ream	5 000 F	Variable
Photocopy paper A3	Ream	17 500 F	Variable
Transparent sellotape	Roll	350 F	Variable
Packaging sellotape	Roll	1 400 F	Variable
Packaging string	Roll	4 500 F	Variable
White glue	Kg	3 500 F	Variable
Industrial rag	Ballot	70 000 F	Variable
Soap paste	Kg	3 000 F	Variable
Toner cartridge HP1200	Cartridge	120 000 F	Variable
Toner cartridge HP5000	Cartridge	180 000 F	Variable
Toner cartridge HP8500-black	Cartridge	150 000 F	Variable
Toner cartridge HP8500-blue	Cartridge	150 000 F	Variable
Toner cartridge HP8500-Red	Cartridge	150 000 F	Variable
Toner cartridgeHP8500-yellow	Cartridge	150 000 F	Variable
Drummer KitC4153A	Cartridge	150 000 F	Variable

Source: SOPECAM inventory department

The following is an extract of the balance sheet of the company of the period concerned which we cannot state here because of confidentiality; it gives data relating to the annual expenses of the company for the total labour costs, taxes, depreciation, water consumption and many other overhead costs.

Table 4-5 Balance sheet extract

ITEMS	AMOUNT (Frs.)	Department
Depreciation	349 199 867	Factory
Spare parts	32450941	Factory
Electricity	16382666	Factory
Water	5 272 398	Factory

Source: SOPECAM balance sheet

Now we are concerned with the determination of the allocation basis for these costs. Because of the lack of precise information, we will use labour as the basis for this allocation. From these data, will try to approximate the weekly and daily figures relating to these expenses so as to be able to arrive at a daily manufacturing unit cost.

We therefore have the following table:

Table 4-6 Overhead expenses

OVERHEAD COSTS
ITEMS	Yearly	Weekly	Daily
Water	5 272 398 F	101 392 F	20 278 F
Electricity	16 382 666 F	315 051 F	63 010 F
Depreciation	349 199 867 F	6 715 382 F	1 343 076 F
Spare parts	32 540 941 F	625 787 F	125 157 F
Total	403 395 872 F	7 757 613 F	1 551 523 F

Source: the author

The information given above about those costs are just daily means, and this means that for most of them we will have to estimate their real daily amounts as they are not all fixed costs. The only fixed costs among them is the one relaying to the depreciation of the factory machineries.

As demonstrated in the second chapter, the Overhead Absorption Rate is got from the formula:

OAR=estimated total manufacturing overhead cost/ estimated total units in the allocation base

OAR=(depreciation+ spare parts+ Electricity+ water)/(total number of labour hours used per day i.e.: 24)

We already have data relating to the daily overhead expenses, what we need now is some information about the machine-hours used to manufacture the newspaper so that we can charge some of the overhead costs its unit cost. These machine-hours will also be used as the labour hours required for the production of the newspaper in the absence of data relating to the exact salaries the company workers.

Table 4-7 Machine-hours used for the production of the newspaper

LABOUR RATES AND AMOUNT
DEPARTMENT	Pre-printing	Soaking	Copy	Printing
Rate	6000	6000	2500	45000
Hours used	8	3	2	3
Total n° of hours used	16

Source: the author

The OARs and associated amounts to be charged for the various expenses are therefore equal to:

Table 4-8 OAR for the various overhead costs

OVERHEAD COSTSITEMSYearly WeeklyDailyOARMean Amount chargedWater 5 272 398 F101 392 F20 278 F845 F13 519 F Electricity 16 382 666 F315 051 F63 010 F2 625 F42 007 F Depreciation 349 199 867 F6 715 382 F1 343 076 F55 962 F895 384 F Spare parts 32 540 941 F625 787 F125 157 F5 215 F83 438 F Total 403 395 872 F7 757 613 F1 551 523 F

Source: The author

Now that we have information relating to the materials, labour, and factory overhead expenses, it is possible for us to determine the daily unit costs using the absorption and variable costing techniques.

* ²⁴ : Fayel, A. & Pernot, D.,(2001) Comptabilité Générale de l'Entreprise, 12th édition, Dunod, Paris.