Best Breads manufactures two types of bread, which are sold as wholesale products to various specialty retail bakeries. Each loaf of bread requires a three-step process. The first step is mixing. The mixing department combines all of the necessary ingredients to create the dough and processes it through high speed mixers. The dough is then left to rise before baking. The second step is baking, which is an entirely automated process. The baking department molds the dough into its final shape and bakes each loaf of bread in a high temperature oven. The final step is finishing, which is an entirely manual process. The finishing department coats each loaf of bread with a special glaze, allows the bread to cool, and then carefully packages each loaf in a specialty carton for sale in retail bakeries.
Required
1. Costs involved in the process are listed next. For each cost, indicate whether it is a direct variable, direct fixed, indirect variable, or indirect fixed cost, assuming “units of production of each kind of bread” is the cost object.
Costs:
Yeast Mixing department manager
Flour Materials handlers in each department
Packaging materials Custodian in factory
Depreciation on ovens Night guard in factory
Depreciation on mixing machines Machinist (running the mixing machine)
Rent on factory building Machine maintenance personnel in each department
Fire insurance on factory building Maintenance supplies for factory
Factory utilities Cleaning supplies for factory
Finishing department hourly laborers
2. If the cost object were the “mixing department” rather than units of production of each kind of bread, which preceding costs would now be direct instead of indirect costs?

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November 5, 2011

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