You will create a report based on the premise that you want to establish a cookie business

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Question:

You will create a report based on the premise that you want to establish a cookie business that sells only one type of specialty cookie with two employees. Your report will provide the following information:

• Introduction (Part 1)

o Create a name and establish a locale for the business.

o Construct a mission statement.

o Decide on the type of cookie you want to sell.

• Costing and Sales Information, Production of 1,000 cookies (Part 2)

o Estimate and explain the costs per cookie based on job order costing. Prepare a job order cost sheet by researching the pricing for these top five ingredients: butter, sugar, vanilla, flour, chips/add-ins.

▪ Manufacturing overhead is 30% of direct labor costs.

▪ It will take two employees working two days to make 1,000 cookies.

o For process costing, you will examine the costs per 1,000 cookies looking at these top three processes (departments): Mixing, Add-ins, and Packaging.

▪ The Mixing Department will be examined in depth.

• Materials will be added at the beginning of the process.

• The cookies will be in the Mixing Department for a total of eight hours; however, the cookies will only be 40% complete before they are transferred to the Add-ins Department. (Use this % for conversion costs.)

o Using the job-order costing system, determine the costs and sales price of your cookies.

• Differences between two-process cost systems (Part 3)

o Compare and contrast the cost methods examined in this project. Discuss using the information created, which costing method in this example, gives more complete costing information, and why. o Discuss product costs and conversion costs and their importance in both costing systems.

• Variances in production – Costs and Revenues (Part 4)

o Examine the variances in both the job order costing and process costing (for the Mixing Department only) systems if the number of your cookies was to decrease to 500 cookies or increase to 1,500 cookies.

o Examine the effect on revenue these two variances in production would have.