Ruszwurm Bakery Ruszwurm Bakery is one of the oldest continuously running bakeries in the world. Located in Budapest, Hungary, their business has grown for generations and now consists of three primary lines of business. First, their facility mass produced baked lngos1 to be sent out to restaurants and street vendors through-out Eastern Europe to be fried and sold for consumption. The process to produce lngos is outlined in Exhibit 1 and they are created using an assembly line type system. Though they ship large quantities of lngos nationwide, locally Ruszwurm supplies most restaurants and hotels in the city with fresh dobos torta2. The process to make these cakes is outlined in Exhibit 2 and uses a batch system as the layering or design choice often changes. They are able to sell their lngos for 260 Forint3 (Ft) each and dobos tortas for 4,100 Ft. Lastly, the bakery's co-owner and world renowned pastry chef, Magda Telkes, takes custom orders for specific desserts ordered for special occasions. These three products share a production space for mixing and baking. Lngos were responsible for 60% of production costs, dobos torta was 30% and custom work was 10%. Only dobos torta and custom baking used the layering and decorating space and equipment, with dobos torta being responsible for 75% of the use of these areas. Telkes felt this would be a fair allotment of overhead costs if a process costing system was used. Telkes' business partner, Vera Lauder, was in charge of the business aspect of Ruszwurm Bakery and wanted reports on a number of managerial accounting matters. The first question seemed like a simple one but was proving to be challenging; what does it cost to produce a lngos and what does it cost to produce a dobos torta? The raw materials that went into a lngos were only 11 Ft. For dobos torta, 250 Ft was the cost of the mixing ingredients and an additional 520 Ft was spent on the decorating ingredients. All raw materials were added immediately at the appropriate step. Lauder had collected data around direct labour in Exhibit 3. The part that made Lauder the most confused was how to allocate the other business expenses listed in Exhibit 4. Lauder also provided a business floor plan in Exhibit 5 and annual sales in Exhibit 6.

Question 1. Using the information above (and appropriate Exhibits) compile a chart of the production overhead costs sorted by product, and provide a grand total of overhead costs to be assigned to each product category.

Question 2. an Exhibit sorting the overhead costs by process needed for lngos and dobos torta should be prepared

Question 3. Assuming that your overhead numbers from Question 2 are correct, and that no opening inventory exists in any step of the process, please use process cost accounting to evaluate appropriate ending inventories and cost of goods sold for both lngos and dobos torta. Please create a report exhibit for each product breaking down these costs in a report to Management

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Expense Rent Insurance Amount 825,000 Ft 44,000 Ft Utilities Equipment 330,000 Ft 770,000 Ft Depreciation - Exhibit 4 Other Business Costs Manager's Notes Covers workplace injury, each job at the bakery within production was considered equally as likely to call on the insurance. The 80% of this cost related to baking and the rest to mixing. This was 3/7th mixing equipment depreciation. Mixing and Baking Equipment Depreciation - Layering and Decorating Supervision 33,000 Ft 990,000 Ft Sales representative 616,000 Ft Freight Out 33,000 Ft This was 5/6th decorating equipment depreciation. This was a fair representation of the use of the joint layering and decorating space as well. Custom Work was done by professionals unsupervised. The rest of the direct Labour was supervised evenly by hour worked. Sales were 80 % Lngos, 15% Dobos Torta and 5% Custom work by volume and 60%, 15% and 25% by dollar value respectively. This was entirely Lngos. 7 Cooling 100 sq ft Exhibit 5 Business Layout Baking 500 sq ft Custom Work Design studio 50 sq ft Layering / Decorating 400 sq ft Lngos 5,250,000 Ft Exhibit 6 Sales Breakdown from fiscal year Dobos Torta 33,600,000 Ft Mixing 300 sq ft 100 sq ft Finished Good storage Custom Work?: 3,255,000 Ft The entire bakery DL team was paid the same hourly wage, except the custom team who earned 4x as much per hour based on their skill. Expense Rent Insurance Amount 825,000 Ft 44,000 Ft Utilities Equipment 330,000 Ft 770,000 Ft Depreciation - Exhibit 4 Other Business Costs Manager's Notes Covers workplace injury, each job at the bakery within production was considered equally as likely to call on the insurance. The 80% of this cost related to baking and the rest to mixing. This was 3/7th mixing equipment depreciation. Mixing and Baking Equipment Depreciation - Layering and Decorating Supervision 33,000 Ft 990,000 Ft Sales representative 616,000 Ft Freight Out 33,000 Ft This was 5/6th decorating equipment depreciation. This was a fair representation of the use of the joint layering and decorating space as well. Custom Work was done by professionals unsupervised. The rest of the direct Labour was supervised evenly by hour worked. Sales were 80 % Lngos, 15% Dobos Torta and 5% Custom work by volume and 60%, 15% and 25% by dollar value respectively. This was entirely Lngos. 7 Cooling 100 sq ft Exhibit 5 Business Layout Baking 500 sq ft Custom Work Design studio 50 sq ft Layering / Decorating 400 sq ft Lngos 5,250,000 Ft Exhibit 6 Sales Breakdown from fiscal year Dobos Torta 33,600,000 Ft Mixing 300 sq ft 100 sq ft Finished Good storage Custom Work?: 3,255,000 Ft The entire bakery DL team was paid the same hourly wage, except the custom team who earned 4x as much per hour based on their skill.