Compute the product cost per unit of butter cake

Assignment Help Managerial Accounting
Reference no: EM132605990

Cakey Bakey Trading (CBT) has been in food manufacturing business for two years since 2018. During its first year of establishment, its only product was Butter Cake. All cakes are baked and packaged in one-kilogram boxes. CBT uses simple costing system with two direct cost categories (direct materials and direct manufacturing labour). Manufacturing overhead was allocated to products using units of production as the allocation base.

During its second year of operation, CBT introduced another product, Pineapple Layer Cake, which was also packaged in one-kilogram boxes. The product differs from Butter Cake in which more expensive ingredients are used, more direct manufacturing labour time is required and more complex manufacturing processing is used. In 2019, CBT continued using its simple costing system in which units of production is used to allocate manufacturing overhead of both products.

For 2019, the company has estimated that it will incur RM421,600.00 in manufacturing overhead cost and produce 160,000 boxes of Butter Cake and 40,000 boxes of Pineapple Layer Cake. The Butter Cake required 0.014 hours of direct labour time per box while the Pineapple Layer Cake required 0.02 hours.

Materials and labour costs per one-kilogram box are as follows:

Cost Butter       Cake RM Pineapple           Layer Cake RM

Direct materials         1.20                           1.80

Direct labour            0.28                               0.40

Since the introduction of the new product, the company's profits have steadily declined despite sales have been increasing rapidly. Management has become increasingly concerned about the accuracy of its costing system. Ms. Alice, who is in charge of costing for CBT decided to 3 investigate the possibility of adopting activity-based costing method. After conducting a thorough discussion with operating personnel, the single manufacturing overhead cost pool was then divided into four activity areas.

The following details are given:

Activity Cost Pool Cost Driver Estimated Percentage of Overhead Cost Expected Activity

                                       Butter Cake                Pineapple             Layer Cake

Mixing Labour hours             30%                      600                     640

Baking Oven hours               45%                      64,000                 86,000

Creaming Machine hours           15%                    36,000                    84,000

Packaging Packaging hours          10%                   24,000                     8,000

Required:

Question a. Compute the product cost per unit of Butter Cake and Pineapple Layer Cake using the simple costing system.

Question b. Compute the product cost per unit of Butter Cake and Pineapple Layer Cake using the activity-based costing system.

Question c. Discuss two (2) reasons that may contribute to CBT's declining profits.

Reference no: EM132605990

Questions Cloud

What is the return on sales for the company : What is the payable's payment period in days (to the nearest day)? What is the company's current ratio (to the nearest 2 decimal places)?
What incentive will the create for the supervisors : What incentive will this create for the supervisors? What improvement can be made by the management to improve the bonus plan? Explain briefly.
Rationales for government intervention : ?Discuss one or more rationales for government intervention in the provision of this good or service.
Explain what a production possibilities frontier is : Suppose you are a farmer with 20 hectares of land on which you could grow either wheat or barley. You can allocate however much land you want to each crop.
Compute the product cost per unit of butter cake : Cakey Bakey Trading, Compute the product cost per unit of Butter Cake and Pineapple Layer Cake using the activity-based costing system.
What rules and regulations are you planning to adhere to : Which business departments, functionalities of NAB, are you planning to audit? And how can you detect regularities, abnormalities in them?
Difference between the two market structures : Give reasons for your answer and explain with the aid of a diagram the difference between the two market structures.
What was the unit cost valuation for product three : Find What was the unit cost valuation for product 3 using the sales revenue basis for allocating joint costs assuming that the revenue receivable
Design a knowledge management strategy in tourism : Design a knowledge management strategy in tourism and hotel industry and discuss it from the epistemological and ontological perspectives.

Reviews

Write a Review

 

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd