In: Accounting
Assignment 1 Job Order Costing
Tracy is unsure how much to charge for the cupcakes. When she was making the cupcakes by herself and only rented a small storefront that was only open on weekends, she calculated the cost per cupcake based on the cost of ingredients and she added 50% to that cost to cover all of her other expenses. She is not sure if that was accurate.
Tracy has asked you to help her determine the cost per cupcake. She has given you her estimated total for each expense. She does not know how to allocate her overhead costs. She also knows that some of her costs are product costs and some are period costs. She has given you a list of costs and needs you to, first, determine which costs are period costs and which costs are product costs and, secondly, determine which are direct materials, direct labor, and factory overhead. She believes that the best cost driver for the factory overhead costs to be the number of cupcakes baked and sold.
Your assignment is to calculate the cost per cupcake and present your findings in a 1 ½ page paper. Explain to Tracy the costs are product costs and the costs are period costs. She also needs to know which costs are direct materials and direct labor and how you allocated the factory overhead. Your paper can contain charts and other graphics you feel are helpful.
Here is her expected annual data:
The first year she expects to sell 84,000 cupcakes. She will pay her supervisor a salary and her bakers an hourly wage. The person she hires to work in the office will receive salary and her salesman will earn a commission based on the number of cupcakes sold for special events.
Expense |
Cost behavior |
Estimated annual amount |
Additional information |
Raw materials |
Variable |
$37,000 |
All are purchased as needed to avoid spoilage and to have the freshest ingredients |
Bakery wages |
Variable |
$62,000 |
They do all of the baking |
Supervisor’s salary |
Fixed |
$37,000 |
Supervisor does not do any baking |
Office personnel |
Fixed |
$24,800 |
|
Tracy’s salary |
Fixed |
$39,000 |
She considers herself CEO |
Salesman's salary |
Variable |
$27,000 |
He is paid based on number of cupcakes sold to special events |
Supplies |
Variable |
$5,000 |
All used in the bakery |
Utilities (electric) |
Variable |
$5,200 |
85% is for the bakery and 15% is for the administrative office |
Utilities (Gas) for ovens |
Variable |
$3,100 |
All for bakery |
Water |
Variable |
$4,300 |
All for bakery |
Repairs and maintenance |
Fixed |
$4,700 |
All for bakery |
Rent expense |
Fixed |
$5,900 |
80% is for the bakery and 20% is for the administrative office |
Telephone and internet |
Fixed |
$2,200 |
All for administrative office |
* |
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