In April 2019, Sitcom Technology received two big project orders from a leading private bank and one small programming work outsourced by a major IT company in Electronic City. The work was completed in the same month with all four of them putting in a lot of hours. The revenue generated from these three projects was Rs 4,10,000.
Questions to discuss:
Identify different types of costs discussed in the case and provide one more example of each. Is there an example of opportunity cost or sunk cost in the case?
Rehan and Nixit are exploring the option of purchasing a vehicle for the daily commute of their staff members. Till now they had been doing a carpool (Nixit’s car) with everyone paying Rs 2000 to Nixit and claiming the same as conveyance expense from Sitcom Technology. Given this scenario, what costs can be considered as a relevant or irrelevant cost for this decision making?
Classify the costs discussed in the case as Fixed or variable, Product or Period costs, Controllable and uncontrollable costs, etc.
Prepare the cost sheet for April 2019 and calculate the profit generated assuming the depreciation on fixed assets to be 10%.
Sample Solution