Fruit Freaks produces handmade frozen desserts for restaurants and hotels. Over the years, Fruit Freaks has...

 

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Fruit Freaks produces handmade frozen desserts for restaurants and hotels. Over the years, Fruit Freaks has built up a reputation of producing healthy frozen desserts that are made from good quality Australian ingredients. Florence Frost the CFO of Fruit Freaks noticed that standard costs have not been reviewed for the 2 years and is planning on conducting a review of its standard costing system. She has asked the production manager Winston Winters to collect production information on its more popular and established product, the Tropical Mango sherbet. The following information was collected. Tropical Mango sherbet is packed in 10 litre tubs. The following direct materials are normally required to produce one tub of sherbet: 10 kilograms of unbruised frozen mango pieces 3 kilograms of raw sugar 3 litres of coconut water cardboard tub As a result of fruit imperfections, frozen mango pieces are sorted by hand to remove bruised mango pieces before production. Five minutes of direct labour is required to sort 1 kilogram of acceptable mango pieces. On average, 1 kilogram of mango pieces is discarded for every 8 kilograms of acceptable mango pieces. Acceptable frozen mango pieces are blended with raw sugar and coconut water to make the sherbet. It takes 15 minutes of direct labour time to blend the ingredients. After blending, the sherbet is packed in a cardboard tub and stored in the freezer room. It takes 3 minutes of direct labour time to pack and 3: transport a box of sherbet to the freezer room. Ms Frost further collected the following costing information from the purchasing and human resource departments: Fruit Freaks purchases A grade frozen Australian mango pieces at a cost of $3 per kilogram. The cost of raw sugar is $0.07 per kilogram. The cost of coconut water is $2 per litre. One cardboard tub cost $0.15 each. Direct labour is paid at the rate of $27 per hour. Required: a) Calculate the standard cost of direct materials required to produce one tub of Tropical Mango sherbet. b) Calculate the standard cost of direct labour required to produce one tub of Tropical Mango sherbet. c) Calculate the standard cost of one tub of Tropical Mango sherbet. (Final answer = $70.71 per tub of sherbet) d) What other factors should Ms Frost's management accountant take into consideration when setting direct material and direct labour standards? (Hint: You may wish to refer to your textbook or lecture slides for generic factors and tailor it to this case, where possible.) Fruit Freaks produces handmade frozen desserts for restaurants and hotels. Over the years, Fruit Freaks has built up a reputation of producing healthy frozen desserts that are made from good quality Australian ingredients. Florence Frost the CFO of Fruit Freaks noticed that standard costs have not been reviewed for the 2 years and is planning on conducting a review of its standard costing system. She has asked the production manager Winston Winters to collect production information on its more popular and established product, the Tropical Mango sherbet. The following information was collected. Tropical Mango sherbet is packed in 10 litre tubs. The following direct materials are normally required to produce one tub of sherbet: 10 kilograms of unbruised frozen mango pieces 3 kilograms of raw sugar 3 litres of coconut water cardboard tub As a result of fruit imperfections, frozen mango pieces are sorted by hand to remove bruised mango pieces before production. Five minutes of direct labour is required to sort 1 kilogram of acceptable mango pieces. On average, 1 kilogram of mango pieces is discarded for every 8 kilograms of acceptable mango pieces. Acceptable frozen mango pieces are blended with raw sugar and coconut water to make the sherbet. It takes 15 minutes of direct labour time to blend the ingredients. After blending, the sherbet is packed in a cardboard tub and stored in the freezer room. It takes 3 minutes of direct labour time to pack and 3: transport a box of sherbet to the freezer room. Ms Frost further collected the following costing information from the purchasing and human resource departments: Fruit Freaks purchases A grade frozen Australian mango pieces at a cost of $3 per kilogram. The cost of raw sugar is $0.07 per kilogram. The cost of coconut water is $2 per litre. One cardboard tub cost $0.15 each. Direct labour is paid at the rate of $27 per hour. Required: a) Calculate the standard cost of direct materials required to produce one tub of Tropical Mango sherbet. b) Calculate the standard cost of direct labour required to produce one tub of Tropical Mango sherbet. c) Calculate the standard cost of one tub of Tropical Mango sherbet. (Final answer = $70.71 per tub of sherbet) d) What other factors should Ms Frost's management accountant take into consideration when setting direct material and direct labour standards? (Hint: You may wish to refer to your textbook or lecture slides for generic factors and tailor it to this case, where possible.)