Harvest Sky Pie Company has a reputation for the best apple pies in Bruce county and...
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Harvest Sky Pie Company has a reputation for the best apple pies in Bruce county and surrounding areas. Stacy started the company five years ago, baking pies at home, and has experienced wonderful success and growth ever since. The company now has three retail outlets located in Meaford, Chatsworth, and Owen Sound, where the pies are sold for $16 along with a selection of vegetables and fruits brought for sale by area farmers. In anticipation of continued growth, Stacy decided to no longer do all of the baking herself and has hired two people (Mike and Tom) to help. She has an undergraduate degree in accounting and understands the benefits of standard costing. Knowing that it would be much more difficult to manage the baking of pies and related costs as a result of having employees involved, Stacy implemented a standard costing system. The standard costs are updated monthly. The standard cost sheet used for July production (previous month) of pies follows: Standard Standard Price/Kg $1.50 Apples Brown sugar Dough Oatmeal Usage/Pie 0.72 kg 0.18 kg 0.11 kg 0.30 kg 2.05 1.11 1.90 Direct labour *Variable overhead *Fixed overhead 0.80 hrs 0.25 hrs 0.15 hrs 12.80 0.68 0.20 *Based on direct labour hours. During July, Harvest Sky Pie Company had the following actual production activity: Actual production of pies Brown sugar was purchased at (per kg) Dough was purchased at (per kg) Oatmeal was purchased at (per kg) 1,800 $1.85 $1.22 $1.90 Direct labour: Direct labour hours total cost |Direct labour hours used $16,835 1,300 Stacy estimates practical activity to be 1,900 units per month. Apples are purchased only twice per year, in March and in October. The other ingredients are purchased throughout each month. Inventory data regarding raw materials for July is provided below. Raw Material Beginning Inventory 7,550 kg 10 kg 35 kg 8 kg Ending Inventory 6,325 kg 5 kg 45 kg 5 kg Inventory Used Apples Brown sugar Dough Oatmeal ? 615 kg 195 kg 438 kg Stacy is very happy with her new hires. Mike brought an apple pie to the hiring interview with Stacy to have her sample the product of his family pie recipe. Mike, beaming with pride, told Stacy that this recipe has won many awards at fall fairs over many years. Stacy tasted the pie and found it extremely sweet, having in her opinion far too much brown sugar. Over the month of July, Stacy thought she had noticed that the pies prepared by Mike were the first to sell out each day and was surprised to find that pie sales were more than 200 units higher than in June. Required: 1. Stacy's goal is to maintain a minimum net profit of 20% on the apple pies. Calculate the standard cost per pie and determine whether the current standard cost of the apple pie will generate the required net profit. 2. Stacy has set a control limit of plus or minus $10 on each of the raw material inputs, for both the individual price and usage variances. Calculate the price and usage variances for each raw material, and determine which variances should be further investigated. (Ignore labour and overhead variances for this question). 3. Analyze the Numbers: Have your team play the role of a managerial accountant consultant. Based on your variance analysis above, could the variances have any connection to Mike or one of the two new hires? 4. Creative Consulting: Use your team's creativity to analyze the business problem and come up with various solutions for the business going forward. (ie. How to increase profits, customer satisfaction, make processes more efficient, people/staff happier, short, medium-term and long-term strategies). Harvest Sky Pie Company has a reputation for the best apple pies in Bruce county and surrounding areas. Stacy started the company five years ago, baking pies at home, and has experienced wonderful success and growth ever since. The company now has three retail outlets located in Meaford, Chatsworth, and Owen Sound, where the pies are sold for $16 along with a selection of vegetables and fruits brought for sale by area farmers. In anticipation of continued growth, Stacy decided to no longer do all of the baking herself and has hired two people (Mike and Tom) to help. She has an undergraduate degree in accounting and understands the benefits of standard costing. Knowing that it would be much more difficult to manage the baking of pies and related costs as a result of having employees involved, Stacy implemented a standard costing system. The standard costs are updated monthly. The standard cost sheet used for July production (previous month) of pies follows: Standard Standard Price/Kg $1.50 Apples Brown sugar Dough Oatmeal Usage/Pie 0.72 kg 0.18 kg 0.11 kg 0.30 kg 2.05 1.11 1.90 Direct labour *Variable overhead *Fixed overhead 0.80 hrs 0.25 hrs 0.15 hrs 12.80 0.68 0.20 *Based on direct labour hours. During July, Harvest Sky Pie Company had the following actual production activity: Actual production of pies Brown sugar was purchased at (per kg) Dough was purchased at (per kg) Oatmeal was purchased at (per kg) 1,800 $1.85 $1.22 $1.90 Direct labour: Direct labour hours total cost |Direct labour hours used $16,835 1,300 Stacy estimates practical activity to be 1,900 units per month. Apples are purchased only twice per year, in March and in October. The other ingredients are purchased throughout each month. Inventory data regarding raw materials for July is provided below. Raw Material Beginning Inventory 7,550 kg 10 kg 35 kg 8 kg Ending Inventory 6,325 kg 5 kg 45 kg 5 kg Inventory Used Apples Brown sugar Dough Oatmeal ? 615 kg 195 kg 438 kg Stacy is very happy with her new hires. Mike brought an apple pie to the hiring interview with Stacy to have her sample the product of his family pie recipe. Mike, beaming with pride, told Stacy that this recipe has won many awards at fall fairs over many years. Stacy tasted the pie and found it extremely sweet, having in her opinion far too much brown sugar. Over the month of July, Stacy thought she had noticed that the pies prepared by Mike were the first to sell out each day and was surprised to find that pie sales were more than 200 units higher than in June. Required: 1. Stacy's goal is to maintain a minimum net profit of 20% on the apple pies. Calculate the standard cost per pie and determine whether the current standard cost of the apple pie will generate the required net profit. 2. Stacy has set a control limit of plus or minus $10 on each of the raw material inputs, for both the individual price and usage variances. Calculate the price and usage variances for each raw material, and determine which variances should be further investigated. (Ignore labour and overhead variances for this question). 3. Analyze the Numbers: Have your team play the role of a managerial accountant consultant. Based on your variance analysis above, could the variances have any connection to Mike or one of the two new hires? 4. Creative Consulting: Use your team's creativity to analyze the business problem and come up with various solutions for the business going forward. (ie. How to increase profits, customer satisfaction, make processes more efficient, people/staff happier, short, medium-term and long-term strategies).
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Required 1 Stacys goal is to maintain a minimum net profit of 20 on the apple pies Calculate the s... View the full answer
Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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