Question

Job Costing – Cookie Experiment-

To celebrate your new found knowledge of Job Costing, you and a classmate (or can be completed individually) will make at least one dozen of cookies and track the cost of the cookies and the process.

Requirements: Track the Direct Materials, Direct Labor and MOH cost for making cookies. Cookies must be made from scratch. No Betty Crocker (or other brand) mixes.

1. For Direct Material, include all ingredients and calculate the cost of DM used of each ingredient.

Hint. Not all ingredients will be DM. Is a teaspoon of baking soda a DM or indirect material?

Please separate DM and Indirect Materials. Both categories must show the total cost of each ingredient and cost of ingredient used!

2. For Direct Labor, complete some research and find the hourly rate of a baker. Based on the time actually working on the cookies (not baking time) calculate the labor.

Hint: DL time would include prep, mixing, & clean-up.

3. MOH: For this assignment MOH will include indirect labor and other costs. Indirect Material will be calculated in step 1 and show separately from MOH.
   1. Possible items to include (there may be more!) when calculating Overhead: water for cleaning, utensils, cleaning supplies, electricity, rent, etc. Full points earned for listing items not included in the previous sentence.

2. For MOH costs, please determine a PDOR Rate for the total SUM OF MOH and CHOOSE ONE allocation base (cost driver) to assign a portion of the MOH costs to the cookies. Must have at least 5 MOH costs.
   1. Recommendation: Calculate the MOH costs for a month and assign to the cookie job based on a single allocation driver.

• Demonstration of calculation of MOH: Please note, this example or allocation rate (hours in a month) cannot be used for your assignment)
  • If calculated my MOH Costs for a month I would have:

$900 Monthly Rent + $45 Monthly Electricity + $10 Monthly cleaning supplies + $35 Monthly water = $990 of total MOH for one month. I could allocate these costs to my cookies based on baking time of the cookies, total Direct Labor time, etc. I chose total hours in a month, 744. if my cookies took a total of 45 minutes to make (from start to finish) I could determine a rate by the following: $990/744 hours (total hours in a month) = $1.33 per hour.

• To assign the MOH, then I use the formula Actual Activity * PDOR. Therefore $1.33 * 45/60 = $ .9975. This would be the MOH portion of my Product Costs.

Questions to answer: Work must be completed in EXCEL.

1. Provide an itemized list of all Direct Material, Indirect Material and Direct Labor Costs. Please indicate any calculations performed to determine Direct Material used or Direct Labor costs. Calculations must be completed in Excel.
   1. Example: 1 cup of sugar is required. The 5 lb bag of sugar has 10 cups. (Remember your conversion skills or look them up online). In Excel show the calculation of the cost of the 1 cup of sugar. Assume bag of sugar costs $2.29 per bag, then in Excel a calculation similar to = 2.29 * (1/10) = $.23 per cup of sugar is completed.

2. What items did you include in the MOH costs? Please list the items and the total costs for those MOH items.

FOR MOH, it is recommended to have two categories:

• MOH Allocated. Based on other MOH Costs (Rent, Water, Electricity, etc) and allocated using a PDOR. Please remember these MOH Costs should be calculated as a total. For example, I would use rent for a month or monthly water bill. The PDOR will allocate the appropriate portion of the cost to the cookies. Please refer to the example on the previous page.

3. What allocation base did you choose to assign the MOH costs to the cookies and why was this allocation base chosen?

4. What was the PDOR. Please show the PDOR calculation.

5. How much MOH was assigned to the cookie job?

6. How many cookies were made?

7. What was the total cost of the cookie job? This will include DM + DL + Indirect Materials + MOH Allocated in step 2.

8. What was the cost per cookie?

9. Based on the cost per cookie, what is your recommended selling price per cookie?

10. What mark-up percentage did you choose?

Answer 1

Please give positive rating your feedback is valuable to me.

In case , any problem please leave a comment .