Cookie Business
Assignment objective: In this project, you will be opening your own specialty cookie company to see how product costing methods and changes in production affect business decisions. You will be creating a series of reports and analyzing the results using the template provided to guide you through the project.
The learning objectives of this project are as follows:
Gain an understanding of product costing (direct materials, direct labor, and overhead).
- Review job order costing.
- Review process costing.
- Make business decisions based on analyzing accounting data.
Length: You will prepare a four- to five-page written report (including spreadsheets) using the Unit III Project Template.
References: A minimum of 2 peer-reviewed references are required, any additional resources used are required to be scholarly/academic in nature and found in the CSU Library. APA formatting is required be used for citations and references. Use this definition to define the term in the instructions.
Definitions: Scholarly journals are sometimes called academic journals. The terms are often used interchangeably to describe the same type of publication. These types of publications are published by universities, academic institutions, professional associations, and commercial enterprises and are compiled by scholars, academics, and other subject authorities.
Details:
First, start the paper with an abstract and introduction section per the assignment template provided above.
Part 1: Establish a cookie business selling only one type of specialty cookie with two employees making the cookies.
Create a name and establish a location for the business.
- Construct a mission statement for the business.
- Decide on the type of cookie you want to make and sell.
Part 2: Develop costing and sales information for 1,000 cookies (this is the first and only order).
Estimate and explain the cost per cookie based on job order costing (manufacturing overhead is 30% of direct labor costs). Prepare a job order cost sheet by researching and identifying the top five ingredients and their estimated costs as your direct materials. Research and identify the cost of wages for your two employees as your direct labor. It typically takes two days to make 1,000 cookies.
- For process costing, examine the costs per 1,000 cookies looking at these top three processes (departments): Mixing, Add-ins, Packaging.
- The Mixing Department will be examined in depth (only do this department).
- All materials will be added in at the beginning of the process.
- The cookies will be in the Mixing Department for a total of 8 hours (use two employees, 4 hours each as your direct labor). The cookies will be 100% complete with respect to materials, and only be 40% complete with respect to conversion costs (labor and overhead) before they are transferred to the Add-ins Department. Manufacturing overhead is 30% of direct labor costs.
- Estimate and explain the sales price you plan to set per cookie based on the cost data.
Part 3: Compare and contrast the costing methods used in this project (job order vs. process costing), including which you believe provides the most useful information as a manager.
Part 4: Discuss what will happen to revenue if the number of the cookies sold increases or decreases.
End this paper with the key observations and present any future recommendations. Use the Unit III Cookie Project Spreadsheet Templates for your job order, and process costing spreadsheets to be embedded in your case study document.
