Green Company sells CBD and Hemp products to the general public through a physical storefront and...

   
 

Transcribed Image Text:

Green Company sells CBD and Hemp products to the general public through a physical storefront and through online sales. The business has six (6) products, and the sales for all products are split with 40% being online and 60% being in-store. The company has 5 departments: Mixing, Lab, Sales/Marketing, Administration, and IT. Lab hours cost $20 each, Mixing hours cost $14 each, Sales/Marketing hours cost $11 each, Administration hours cost $12 each, and IT hours cost $18 each. These labor hour costs could change after service department costs are allocated. Products 1, 2, and 3 have to be further handled and processed by the company to make them ready for sale. This time is split between the Mixing Department (40%), the Lab Department (45%), and the Sales/Marketing Department (15%). Any material used for these products is added at the beginning of the process. Products 4, 5, and 6 are purchased pre-packaged and then minimal effort is needed to resell them to customers. However, some of these items do go through the Lab Department for randomized testing. This averages out to be approximately 10% of the labor hours for these products with the rest of their time going through Sales/Marketing (90%). The company has certain fixed cost items that are shared between the Online Store and the physical Storefront: Insurance and Warehouse Costs. The Server Space and Website costs are for the Online Store, and the remaining fixed cost items are for the physical Storefront. All costs are fixed costs. Overhead costs are allocated based on labor hours. The company is wrapping up year-end and they are planning for the upcoming year's sales and budgets. They have the following Sales mix: Online-40% in-store-60% Droducts: mixing: lab: Fixed COS+S: online store - 2 40% 40%% 45% 45% Sales/marketing: 15% 15% administration: - IT: - departments: mixing lab Sales/ marketing administration Server space website costs insurance . . IT time in each department: rent (warehouse) utilities (warehouse) . - Costs per hour: 14 20 11 12 18 3 40% 45% 15% - 4 physical store front insurance rent (store) rent (warehouse) 10% 90% utilities (Store) - - utilities (warehouse) 5 10% 90% 10% 90% Product 1 Product 2 Product 3 Product 4 Product 5 Product 6 Product 1 Department Mixing Lab Sales/Marketing Administration IT Fixed Overhead Rent - Store Rent-Warehouse. $ $ Insurance Utilities - Store Utilities - Warehouse Server Space and Website Total Overhead $ $ $ $ Estimated Manufacturing Overhead - Allocated on Direct Labor Hours of Mixing, Lab, and Sales/Marketing $ $ Ś Wholesale Costs (Direct Material) $ $ Units in Beginning WIP (80% complete) $ $ 1 2.00 4.00 3.00 6.00 5 10.00 12.00 Number of Employees 2 2 1 The company wants an annual net profit of $250,000 1,200 Direct Labor Hours 60,000 30,000 24,000 21,600 6,000 14,400 156,000 0.50 0.75 1.00 0.50 0.50 0.25 Units Started and Completed 2,000 Type of Department Operational Operational Operational Service Service Estimated Manufacturing Overhead Rate Units in Ending WIP (40% Complete) 450 Total Hours Worked per Employee 2080 2080 1040 2080 2080 $ Margin % 20.00% 20.00% 15.00 % 12.00% 12.00% 10.00% 55,100 Labor Cost in Beg WIP $ 600 475 0 3,400 $ Server Hours Used 120 350 Sales Mix % 25.00% 20.00% 12.00% 15.00% 18.00% 10.00% Current Period Labor Costs 4,500 Labor Hours Used 4160 2080 5200 4160 2080 Total Cost per Employee (Hours x Rate) $ $ $ $ $ 29,120 41,600 11,440 24,960 37,440 questions: • Product 1 is made the most. Calculate the ending WIP balance in units and dollars using the weighted average method. All other products were finished at year-end. All materials are added at the beginning of the process. • Allocate the service departments' costs to the operating departments using the reciprocal method. The allocation of IT Department costs is based on server hours and the Administration Department costs are allocated based on labor hours. • Calculate the total cost of each product. • Calculate the Break-Even in Units Sold for the given sales mix of products. • Calculate the Units Sold needed for the given sales mix of products for the company to make $250,000 in profit. Calculate the Overhead for In-Store operations and Online operations. • Use the above overhead to see which sales method is the most profitable, Online or In-Store. If you had $100,000 to invest in the business, which product would you invest in, and would you push it Online or In- Store? Green Company sells CBD and Hemp products to the general public through a physical storefront and through online sales. The business has six (6) products, and the sales for all products are split with 40% being online and 60% being in-store. The company has 5 departments: Mixing, Lab, Sales/Marketing, Administration, and IT. Lab hours cost $20 each, Mixing hours cost $14 each, Sales/Marketing hours cost $11 each, Administration hours cost $12 each, and IT hours cost $18 each. These labor hour costs could change after service department costs are allocated. Products 1, 2, and 3 have to be further handled and processed by the company to make them ready for sale. This time is split between the Mixing Department (40%), the Lab Department (45%), and the Sales/Marketing Department (15%). Any material used for these products is added at the beginning of the process. Products 4, 5, and 6 are purchased pre-packaged and then minimal effort is needed to resell them to customers. However, some of these items do go through the Lab Department for randomized testing. This averages out to be approximately 10% of the labor hours for these products with the rest of their time going through Sales/Marketing (90%). The company has certain fixed cost items that are shared between the Online Store and the physical Storefront: Insurance and Warehouse Costs. The Server Space and Website costs are for the Online Store, and the remaining fixed cost items are for the physical Storefront. All costs are fixed costs. Overhead costs are allocated based on labor hours. The company is wrapping up year-end and they are planning for the upcoming year's sales and budgets. They have the following Sales mix: Online-40% in-store-60% Droducts: mixing: lab: Fixed COS+S: online store - 2 40% 40%% 45% 45% Sales/marketing: 15% 15% administration: - IT: - departments: mixing lab Sales/ marketing administration Server space website costs insurance . . IT time in each department: rent (warehouse) utilities (warehouse) . - Costs per hour: 14 20 11 12 18 3 40% 45% 15% - 4 physical store front insurance rent (store) rent (warehouse) 10% 90% utilities (Store) - - utilities (warehouse) 5 10% 90% 10% 90% Product 1 Product 2 Product 3 Product 4 Product 5 Product 6 Product 1 Department Mixing Lab Sales/Marketing Administration IT Fixed Overhead Rent - Store Rent-Warehouse. $ $ Insurance Utilities - Store Utilities - Warehouse Server Space and Website Total Overhead $ $ $ $ Estimated Manufacturing Overhead - Allocated on Direct Labor Hours of Mixing, Lab, and Sales/Marketing $ $ Ś Wholesale Costs (Direct Material) $ $ Units in Beginning WIP (80% complete) $ $ 1 2.00 4.00 3.00 6.00 5 10.00 12.00 Number of Employees 2 2 1 The company wants an annual net profit of $250,000 1,200 Direct Labor Hours 60,000 30,000 24,000 21,600 6,000 14,400 156,000 0.50 0.75 1.00 0.50 0.50 0.25 Units Started and Completed 2,000 Type of Department Operational Operational Operational Service Service Estimated Manufacturing Overhead Rate Units in Ending WIP (40% Complete) 450 Total Hours Worked per Employee 2080 2080 1040 2080 2080 $ Margin % 20.00% 20.00% 15.00 % 12.00% 12.00% 10.00% 55,100 Labor Cost in Beg WIP $ 600 475 0 3,400 $ Server Hours Used 120 350 Sales Mix % 25.00% 20.00% 12.00% 15.00% 18.00% 10.00% Current Period Labor Costs 4,500 Labor Hours Used 4160 2080 5200 4160 2080 Total Cost per Employee (Hours x Rate) $ $ $ $ $ 29,120 41,600 11,440 24,960 37,440 questions: • Product 1 is made the most. Calculate the ending WIP balance in units and dollars using the weighted average method. All other products were finished at year-end. All materials are added at the beginning of the process. • Allocate the service departments' costs to the operating departments using the reciprocal method. The allocation of IT Department costs is based on server hours and the Administration Department costs are allocated based on labor hours. • Calculate the total cost of each product. • Calculate the Break-Even in Units Sold for the given sales mix of products. • Calculate the Units Sold needed for the given sales mix of products for the company to make $250,000 in profit. Calculate the Overhead for In-Store operations and Online operations. • Use the above overhead to see which sales method is the most profitable, Online or In-Store. If you had $100,000 to invest in the business, which product would you invest in, and would you push it Online or In- Store?