Going to the dogs has been good for Mark Beckloff and Dan Dye. Back in 1989 they founded the first bakery just for 4 legged canine friends with little more than the desire to satisfy the finicky palate of their beloved 114 pound deaf Great Dane named Gracie. The small venture has grown from a single store in downtown Kansas City to more than 40 locations worldwide including Japan and Korea. Their dog treats are made from wholesome ingredients such as flour, eggs, carrots, spinach, peanut butter, and carob and have names such as Rollovers, Pup Tarts, Scottie Biscottis and Great Danish. Some treats are even frosted with honey yogurt icings and decorated with colorful edible flourishes. Special occasion carrot or carob cakes can be personalized by an in store pastry chef. The company regularly updates its 100+ product line to entice dig lovers everywhere back to the stores again and again. Selling prices range from a few cents for a small biscuit to more than $20 for a special order cake 3 dog bakery has an 80,000 square foot warehouse in Kansas City containing manufacturing, distribution, and corporate offices that prepares 70% of the goods sold. Except for slow summer months the manufacturing operation runs 27/7 producing baked biscuits and carob dipped items that can pack and ship well. There is one main assembly line with stations for mixing ingredients, mechanized cutting of shapes extruding doughnut shaped biscuits placing biscuits on baking sheets, baking in ovens, cooling, carob dipping hand packing into trays or containers, shrink wrapping and boxing. Most trays hold 12 speciality biscuits that are hand packed. A conveyer belt is used for automated packing of small biscuits into 7 ounce tubs. Employees are cross trained to perform multiple assembly line functions and can work on every type of product produced at the plant.

For the remaining 30% of finished goods each store has a specially outfitted kitchen used for preparing cakes, brownies, tarts, and other delicate or frosted items. Prepackaged mixes created back at the production facility are used to assure consistent quality across all stores. The retail outlets also sell non food products such as bowls, leashes, books, mugs, and t-shirts. Some stores even host yappie hours and in store birthday parties for dog socialization. Customers don't have to visit a 3 dog bakery to enjoy the treats however. The company has a whimsical Web site that is home to the "dogalog" . The site features all kinds of treats available for immediate shipping and accounts for 10% of the company's business now. In addition to its retail and e-commerce channels 3 Dog Bakery places heavy emphasis on its expanding wholesale business. The products were originally offered through national chains such as PetsMart and Target but are now finding success with high end grocery stores that have lost much of their pet business to big box specially pet stores and want higher end quality product to offer their shoppers. Even Wal-Mart can't ignore the appeal of 3 Dog Bakery products. Dog lovers can find Lick and Crunch Cookies on the shelves there.

Annual revenues exceed $20 million for this privately held company. As for the pet market itself there are more than 60 million pet dogs in the USA alone and with nearly every owner buying anywhere from 1 to 5 packages of treats per month. Two thirds of pet owners give their pets gifts more than half give Christmas presents and 25% give birthday gifts. Pet owners spend in excess $20 billion each year in an industry the includes animal products, food, and services. Owners who spend more than $300 million per year on their dogs tend to be younger more affluent, married, and have no children

1. To what cost could 3 Dog Bakery trace its cost?

2. Classify the following cost items as direct, indirect. Also if fixed or variable with respect to the production department. You will have 2 answers for each item. Direct or indirect then fixed or variable

A. Salary of the production department manager who oversees manufacturing

B. Salaries of founders Dan Dye and Mark Beckloff

C. Cardboard trays used to package sets of 12 speciality biscuits

D. Salary of the Web graphics designer who prepares the online "dogalog" illustrations and layout

E. Annual maintenance service agreement for the conveyer belt

F. Wages paid to assembly line workers who mix Scottie Biscotti ingredients in batches

G. Utilities for the entire Kansas City warehouse

H. Cost of flour, eggs, and honey yogurt icing for the Pup Tarts

3. What sectors manufacturing, merchandising, or service does 3 Dog Bakery operate in? Why are they classified this way?

4. When Wal-Mart purchases Lick and Crunch Cookies for sale in its stores is the purchase considered a period cost or an inventoriable cost? Why? What costs can Wal-Mart include as part of the purchase cost?

Answer rating: 100% (QA)

1 3 dog Bakery can trace its costs to Direct materials Direct Labor Overhead Overheads are Indirect ... View the full answer