Cost Classification (Assignment #1)

The first item on his schedule was to list all the key products or items that he would need to start the business. His list included a conventional oven, a cash register, baking pans, butter, eggs, health inspection, business licenses, flour, sugar, baking soda, raisins, and cinnamon. His daughter Michelle and his niece Jennifer offered to help in the bakery. His friend Fern offered to supervise the girls so he could focus on business development. S & Ss cost drivers are provided in Table #1.

Required: Rich needs your help in classifying the various costs. He provided the information below to assist you in the identification. Use Table 2 for your answers.

1. Behavior (fixed or variable)
2. Traceability (direct or indirect)
3. Financial reporting (product or period)
4. If product cost, identify which items are direct materials, direct labor or manufacturing overhead.

TABLE #1: COST INFORMATION ITEM AND INGREDIENTS COST STANDARD PER CAKE Conventional oven $6,000 (depreciated over 5 years on a SL basis No salvage) n/a s0 (provided by landlord) Refrigerator Baking pans, licenses $0 (paid by dad) Baking flour $24 per 8 lb. bag 1 pound $2 dozen 4 eggs Eggs 1 lb $15 per 25 lb. bag Sugar Baking soda $6 per 14 lb. box 1 lb $6.50 per 4 lb. Butter /2 lb $8 per 2 lbs. Raisins Others (cinnamon, yeast, walnuts) $30 for all 3 boxes per month $12 per month (rental for 2 years) Cash register Utilities (includes gas, electric, and water) $50 month Mobile phone (business) $50 month Salary Rich $500 month Wages Michelle/Jen $8 hr 1 person 1.5 hours Salary Fern $100 month $100 month Accountant Estimated MOH $4 per cake Table 2 Assignment #1 COST CLASSIFICATION CHART Fixed Variable Direct Indirect Product DM Period Description DL Oven Refrigerator Baking Pans Flour Eggs Sugar Baking Soda Butter Raisins Other Materials Cash Register Utilities Mobile Phone Rich Michelle/Jennifer Fern Accountant Business License Health Inspections Rent