4. Complete an example job cost sheet using the methods you describe. If you need to make assumptions in order to complete the sheet, indicate on the sheet how the figures were estimated.

Humble Pepsideinde ofesor. Thomas thew Lehmustele Purely acceso me the rest Am totunt where the mind there is Memand arrowerowon water. Indender. they were they Apartementet power, COMO wth Tech sine Create the whole e dotted here two Here Natural. Und we were they waitement en to the materiale und das eines redunda nelere dingen en het me sanded with the fight there for an hour piese decoratie de and laced on the i shiped hi ta kr t des and there is plenty- mertime The conferind posily uning down the factores en 34 www.render these word For het producten in the The other production in managing and income there where weryferite decorere cose le candelinearthstor wholester Worted to platfordrew into the Now we content Boxes Home The lyde estaw 0.00 52.5 na wewe fisien die weerman wonde can truss Terug wwwwwww de forehe med the world to our wordt 3:00 .. Thewly www . wowe More.com 5:03, Package war $5.9. There where respondentes Sowowitecto preberer theo The wewe welches the terratreste paround 20 lehet ter with more down depanding on the deator and type 200 slike inden we eerst operator parentai palan in tam Telecti tenurtest earth a y autput tal ater they have the since the conany fees restese. Linda o corredate course hown to the emples, transportes be Tayer and despre arge their homes and two way to tract The company has met het grote of that can control the world developed while working toward er COMA degration The Centrale bonded for help determining product cate Humble Piescans for print productie profitability analysis Finance planning and hope marges understand the best costs are only one component. The company currently bases rang decisions on the three cost. Consumer and competition. As a bare minimum, the company wants to achieve a target 17% poprotein for higher on cort but Unce and Taylor considerata ons wing to get mortant factor in They want to be sure to be Humble Piescent with other cong Table previewed the cost and were data for May 2016 Additional information about costs can be found in the teste Isle Frencial Data Layout of Products Prod Table 1: Selected Financial Data factual cost and revenue data for May 2013 Cost Category Behavior May 2015 Sures 57001 Raw Materih Variable 12,5 Bakery labor Meed 15.12 Administration Sant ALMZ Supplies Valle Freight Shipping on Vatable 4,902 Freight Shing-Out Vortable 64.202 - Elect Vatable 9813 -Gesel Valable 3067 Valable Repin Mastenance 4.250 Telephone & internet Ford 2.300 Cowary 75.00 Depreciation pense Pant Melding 58460 320 Miers 7.832 7.491 Owens 941 Warehouse 3230 Total Dupload 4114 Telenet 7.02 Operating Profit US Income 22.210 Met operating income S4736 Unit volume 30.980 whole,33,520 variety 5400 Average Operating Assets $5.500,000 Minimum Rate of Return . C.05.130 Fig. 20,165 Package S. 15.00 5-10 24 Roman 512, Production $10.00 Package hele wi S. Shop . 3430 25 Notes to Selected Financial Data Higher out mahafour, presud bahate on the package label Favorities are wellow.doller contes del part of the weight of the pie such as spion, dyr, salt, and certain that don't my appear on the package label Wides the crust andling ingredients, raw material include the package and lot Bakerylbor: The cast outcomes of 22 and time and the rest hourly workers Bakery or women are organised to four cores production line imking iting and bakhel, packaging unitation and warehouse aluded as part of cost of good Administration Salaries, encudes taxes and benefits for the Vice President of Operations, the Controller, Human Resources Manager and we administrative support people Supplies includes supplies relating to production, decorating sanitation and warehouse think adhesive, pastry bags, satulas, sapersing pent.gloves and so on. Freight & Shipping In The costs of hoping ingredients and other material to the factory from super freight & Shipping Out: The consolirrhed products to cantomer location and distribution center Utilities Electricity: Approximately 10% for administrative office and the remainder for the factory. The factory portionales somewhat with production volume Utilities Gas (overs: The factory portion varies with production lume Water: As for sanitation and varies proportionately with production volume Repairs & Maintenance: All for production. Telephone & Internet:As for the administrative office Co Owners' salary: Linde Jackson and Taylor Johnson Brokers' commissions Generaly 4% of sales Income Tax Average total tax rate is 32 Your team's assignment Linda and Taylor are asking several firms to provide a proposal recommending what type of costing approach will help them determine more accurate cost information for Humble Pies' pricing and product decisions. Your firm has been invited to provide a proposal. In no more than 1,000 words, write an executive summary addressing the issue (charts and tables with numerical values and calculations will not be included in the word count). Consider the following questions: 4. Complete an example job cost sheet using the methods you describe if you need to make assumptions in order to complete the sheet indicate on the sheet how the figures were estimated 101 Job # Amounts ordered: Whole pies Variety pack SO 60 Whole Unit cost Direct Material Units Total S Direct Labor Hours Cost/hr Totals Manufuring Overhead Cost driver Cost/unit of Total S Total cost for job per product Cost per unit Selling price per unit *Overhead Calculation -- desccription of method: Total overhead cost overhead cost cost driver cost driver rate de: Variety Unit cost Total $ Units Total S Total $ Hours Cost/hr Total S of Total $ Cost driver Cost/unit of Total S cost driver rate description Stage One A history of Humble Pies Humble Pies, Inc. is the genius of childhood neighbors and best friends Linda Jackson and Taylor Johnson. Though almost inseparable through high school, the two parted ways after graduation-Linda heading abroad to study the art of pasty making in some of the most elite patisseries in Paris, and Taylor pursuing his love of food (especially bacon) by landing jobs in some of the finest restaurants in their hometown of Charlotte, N.C. A chance encounter back in 2005 reunited the two and got them talking of their mutual love of food and what they'd been learning. Soon they were spending their free time crafting quirky but sophisticated (not to mention delicious) pies--passing them out to friends and family, and building a grassroots fan base around town. When the operation outgrew the Jackson family kitchen, Linda and Taylor applied for a small business loan. With it, they bought a small pie factory in Charlotte and became the proud owners of a 60,000 square-foot facility where they now produce high-quality pies. A couple years ago, as demand for the pies grew to a national market (thanks to the company's Instagram account), the co-owners hired a new Controller, a CPA with her Chartered Global Management Accountant (CGMA) designation from their CPA firm to help them continue to grow and stay profitable. Now they just landed their largest grocery store yet. In 2017, the company had $6.1 million in sales revenue and is on track to do $9.3 million this year. Humble Pies uses natural and organic ingredients, and combines Linda's Parisian techniques with Taylor's unexpected takes on classical southern desserts like Bacon Chocolate Chess, Avocado Key Lime and Chai Apple Pie. It offers two main product lines: 10-inch whole pies are pre-sliced, boxed and sold to distributors for food service applications or grocery in-store bakery cases. 10-inch variety pies are packed in strong, clear plastic domes to be sold in refrigerated cases and with custom labels. The variety packs contain two pieces of each kind of pie. Linda and Taylor love getting feedback from their fans and are always testing new recipes based on suggestions or grocer suppliers' needs. They often receive requests from food chains for different types and sizes of pies, and must decide which ones to accept and which ones to pass on. Pie production Naturally, Linda and Taylor can't reveal their recipes, but they have provided some details on how the pies are made. Most pies go through a general four-step process: mixing, filling, baking and packaging. Humble Pies makes five different crusts mixed in large batches, and fillings are produced in smaller batches depending on the production schedule. Next, crusts are placed in tins and filled with, well, the filling and baked for 45 minutes (20 at a time). After they've cooled for an hour, pies are decorated, sliced, packaged and labeled and placed on pallets to freeze until shipped. It takes about a week to complete a pie product order and the plant uses just-in- time production methods Since contaminated food would lead to a visit by the Health Department (and possibly shutting down the factory), there are at least three sanitation workers on duty at all times. Generally, there are 3-4 warehouse workers on duty to handle the shipping, receiving and storage of raw materials and finished product. The plant typically runs two shifts per day with two production supervisors assigned to each shift. For each of the two product lines, the process is combined in the same production line until the packaging area. The process is the same regardless of the flavors or ingredients for the production line (mixing taking about 3 minutes per pie, filling taking about 5 seconds per pie, and baking.) However, the processes between the product lines is very different in the packaging department, because the variety packs take much longer than for whole pies. Workers need to pull different flavor slices and place them in the same tin for the variety pack. Not to mention the packaging is different. The whole pies go in boxes while the variety pies go in lidded plastic containers. Both lines have similar labeling requirements. Humble Pies seldom places its own labels and logo on any of their products. Label designs generally come from the customer, so they vary based on each order. The plant currently has capacity to do $1 million in sales per month, but with additional investments in ovens, mixers and workstations for about $500,000) it could increase to $1.5 million October through December tends to be a higher volume period (with increased demand for holidays like Thanksgiving and New Year's), resulting in Humble Pies getting roughly 60% of its business during that time period. Because of the rush, the plant runs overtime and weekend shifts as needed to get the product to its suppliers. The owners believe the labeling process significantly slows down production time. Reports Humble Pies' managers rely heavily on a "Labor Report to manage its work force. The report lists four salaried workers and approximately 50 hourly employees, expected number of work days for the month, hours per day (typically B) and total projected hours for the month. The hours are multiplied by the employee pay rate (from $10.50-$15.50 per hour) to get expected monthly gross pay amount for each hourly employee based on a 40-hour workweek. Production workers are paid as following: Mixing workers cam $10.50/ht, Filling and baking workers earn $10.50/hr, Packaging workers earn $15.50/hr. The sum of all expected hourly employee gross monthly pay amounts are added to the salaried production workers gross monthly pay and the projected total payroll added costs (Employer taxes, Social Security, etc.) to get "total labor dollars" cost for the month. The total labor dollars workers are paid as following: Mixing workers earn $10.50/hr Filling and baking workers earn $10.50/hr, Packaging workers earn $15.50/hr. The sum of all expected hourly employee gross monthly pay amounts are added to the salaried production workers gross monthly pay and the projected total payroll added costs (Employer taxes, Social Security, etc.) to get "total labor dollars" cost for the month. The total labor dollars are divided by projected sales revenues to get a "projected labor percentage." Management watches this number pretty closely and tries to keep it around 20% of sales. In the past, it was assumed that labor costs for the company did not change with sales volume, and some months were profitable and some were not. Currently, Humble Pies' managers adjust labor hours up or down depending on the demand for pies and try to keep the projected labor near 20% of sales. Costing Issues Linda and Taylor are skilled at determining the cost of ingredients, but when it comes to labor and the overhead of each product line, they're not sure where to start. At the moment, Humble Pies allocates the same amount of overhead costs to every output unit. While total labor averages 20%, they believe that labor and overhead costs vary greatly by product line. And, since the company does not currently track labor hours by product line, Linda and Taylor have no idea of labor cost or profitability by product line. A digital biometric time clock keeps track of hours for the employees, but management is open to asking shift workers to track their hours by job or batch. Taylor and Linda's primary concern is making sure there is a good reason to change the method and that there's a simple and low-cost way to track it. The company has a small but growing administrative staff that can do some basic record keeping while the Controller manages financial reporting, taxes and decision analysis, a skill she developed while working toward her CGMA designation. The Controller has asked for help determining a product costing system Humble Pies can use for pricing decisions, product line profitability analysis, financial planning and helping managers understand the business. But costs are only one component. The company currently bases pricing decisions on the "three C's": cost,consumer and competition. As a bare minimum, the company wants to achieve a target 17% gross profit margin (or higher) on cost, but Linda and Taylor consider what a consumer is willing to pay the most important factor in pricing. They want to be sure to keep Humble Pies competitive with other companies. Table 1 provides selected actual cost and revenue data for May 2018. Additional information about costs can be found in the Notes to Selected Financial Data below. Layout of Production Facility: Warehouse Administration 15 of space Packaging variety packs 15% of space 20% of space Filing Dept. 10% of space Baking Dept 15% of space Packaging whole of Mixing Dept. 15% of space Sentation Net son Table 1: Selected Financial Data (actual cost and revenue data for May 2018) Cost Category Behavior May 2018 Sales $766,667 Expenses: Raw Materials 1 Variable 327,934 Bakery labor 2 Mixed 158,767 Administration Salaries Fixed 41,367 Supplies Variable 3,833 Freight & Shipping-in Variable 4,907 Freight & Shipping-Out Variable 64,707 Utilities - Electricity Variable 9,813 Utilities - Gas (ovens) Variable 3,067 Water Variable 920 Repairs & Maintenance Fixed 4,293 Telephone & Internet Fixed 2,300 Co-owners' salary Fixed 25,300 Depreciation Expense: Plant Building $9,460 Pastry Machines 6,920 Mixers 7,832 Filling Equip 7,471 Ovens 8,941 Warehouse Freezers 9.210 Total Depr. Fixed 49,834 Total Expenses 697,042 Operating Profit 69,625 Income Tax 22,280 Net operating income $47345 Unit volume (30,980 whole, 33,520 variety) Average Operating Assets Minimum Rate of Return 64,500 units $5,500,000 8.00% 1 Raw materials Crust ingredients ($.11) $7,120 Filling ingredients($4.65) 300,165 Packaging: Tins (5.08) 5,065 Labels (5.076) 4,916 Boxes ($.11) 3,617 Plastic containers (5.22) 2051 $327,934 2 Labor: Production Supervisors' Salaries $34,929 Production line wages ($10.50/hr) 51,613 Packaging labor ($15.50/hr): whole pies 7,016 variety pack 31,359 Sanitation wages ($15.50/hr) 18,940 Shipping & receiving wages ($15.50/hr) 14,910 $158,767 Notes to Selected Financial Data Raw Materials: Includes main ingredients and flavor additives. Main ingredients are relatively higher cost items such as flour, sugar, eggs, nuts and fruit that appear on the package label. Flavor additives are relatively low-dollar cost items and a small part of the weight of the pie such as spices, dyes, salt, and certain oils that don't always appear on the package label. Besides the crust and filling ingredients, raw materials include the tins, packaging and labels. Bakery labor: The cost amount consists of 22% supervisory salaries and taxes and the rest hourly workers. Bakery labor workers are organized into four categories: production line (mixing, filling and baking), packaging, sanitation and warehouse (all included as part of cost of goods sold). Administration Salaries: Includes taxes and benefits for the Vice President of Operations, the Controller, Human Resources Manager and two administrative support people. Supplies: Includes supplies relating to production, decorating, sanitation and warehouse (think: adhesive, pastry bags, spatulas, scrapers, icing pens, gloves and so on). Freight & Shipping-In: The costs of shipping raw ingredients and other materials to the factory from suppliers. Freight & Shipping-Out: The costs of shipping finished products to customer locations and distribution centers. Utilities Electricity: Approximately 10% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Utilities Gas (ovens): The factory portion varies with production volume. Water: All for sanitation and varies proportionately with production volume. Repairs & Maintenance: All for production. Telephone & Internet: All for the administrative office Co-owners' salary: Linda Jackson and Taylor Johnson. Brokers' commissions: Generally 4% of sales. Income Tax: Average total tax rate is 32%. Your team's assignment Linda and Taylor are asking several firms to provide a proposal recommending what type of costing approach will help them determine more accurate cost information for Humble Pies' pricing and product decisions. Your firm has been invited to provide a proposal. In no more than 1,000 words, write an executive summary addressing the issue (charts and tables with numerical values and calculations will not be included in the word count). Consider the following questions: 4. Complete an example job cost sheet using the methods you describe. If you need to make assumptions in order to complete the sheet indicate on the sheet how the figures were estimated. Humble Pepsideinde ofesor. Thomas thew Lehmustele Purely acceso me the rest Am totunt where the mind there is Memand arrowerowon water. Indender. they were they Apartementet power, COMO wth Tech sine Create the whole e dotted here two Here Natural. Und we were they waitement en to the materiale und das eines redunda nelere dingen en het me sanded with the fight there for an hour piese decoratie de and laced on the i shiped hi ta kr t des and there is plenty- mertime The conferind posily uning down the factores en 34 www.render these word For het producten in the The other production in managing and income there where weryferite decorere cose le candelinearthstor wholester Worted to platfordrew into the Now we content Boxes Home The lyde estaw 0.00 52.5 na wewe fisien die weerman wonde can truss Terug wwwwwww de forehe med the world to our wordt 3:00 .. Thewly www . wowe More.com 5:03, Package war $5.9. There where respondentes Sowowitecto preberer theo The wewe welches the terratreste paround 20 lehet ter with more down depanding on the deator and type 200 slike inden we eerst operator parentai palan in tam Telecti tenurtest earth a y autput tal ater they have the since the conany fees restese. Linda o corredate course hown to the emples, transportes be Tayer and despre arge their homes and two way to tract The company has met het grote of that can control the world developed while working toward er COMA degration The Centrale bonded for help determining product cate Humble Piescans for print productie profitability analysis Finance planning and hope marges understand the best costs are only one component. The company currently bases rang decisions on the three cost. Consumer and competition. As a bare minimum, the company wants to achieve a target 17% poprotein for higher on cort but Unce and Taylor considerata ons wing to get mortant factor in They want to be sure to be Humble Piescent with other cong Table previewed the cost and were data for May 2016 Additional information about costs can be found in the teste Isle Frencial Data Layout of Products Prod Table 1: Selected Financial Data factual cost and revenue data for May 2013 Cost Category Behavior May 2015 Sures 57001 Raw Materih Variable 12,5 Bakery labor Meed 15.12 Administration Sant ALMZ Supplies Valle Freight Shipping on Vatable 4,902 Freight Shing-Out Vortable 64.202 - Elect Vatable 9813 -Gesel Valable 3067 Valable Repin Mastenance 4.250 Telephone & internet Ford 2.300 Cowary 75.00 Depreciation pense Pant Melding 58460 320 Miers 7.832 7.491 Owens 941 Warehouse 3230 Total Dupload 4114 Telenet 7.02 Operating Profit US Income 22.210 Met operating income S4736 Unit volume 30.980 whole,33,520 variety 5400 Average Operating Assets $5.500,000 Minimum Rate of Return . C.05.130 Fig. 20,165 Package S. 15.00 5-10 24 Roman 512, Production $10.00 Package hele wi S. Shop . 3430 25 Notes to Selected Financial Data Higher out mahafour, presud bahate on the package label Favorities are wellow.doller contes del part of the weight of the pie such as spion, dyr, salt, and certain that don't my appear on the package label Wides the crust andling ingredients, raw material include the package and lot Bakerylbor: The cast outcomes of 22 and time and the rest hourly workers Bakery or women are organised to four cores production line imking iting and bakhel, packaging unitation and warehouse aluded as part of cost of good Administration Salaries, encudes taxes and benefits for the Vice President of Operations, the Controller, Human Resources Manager and we administrative support people Supplies includes supplies relating to production, decorating sanitation and warehouse think adhesive, pastry bags, satulas, sapersing pent.gloves and so on. Freight & Shipping In The costs of hoping ingredients and other material to the factory from super freight & Shipping Out: The consolirrhed products to cantomer location and distribution center Utilities Electricity: Approximately 10% for administrative office and the remainder for the factory. The factory portionales somewhat with production volume Utilities Gas (overs: The factory portion varies with production lume Water: As for sanitation and varies proportionately with production volume Repairs & Maintenance: All for production. Telephone & Internet:As for the administrative office Co Owners' salary: Linde Jackson and Taylor Johnson Brokers' commissions Generaly 4% of sales Income Tax Average total tax rate is 32 Your team's assignment Linda and Taylor are asking several firms to provide a proposal recommending what type of costing approach will help them determine more accurate cost information for Humble Pies' pricing and product decisions. Your firm has been invited to provide a proposal. In no more than 1,000 words, write an executive summary addressing the issue (charts and tables with numerical values and calculations will not be included in the word count). Consider the following questions: 4. Complete an example job cost sheet using the methods you describe if you need to make assumptions in order to complete the sheet indicate on the sheet how the figures were estimated 101 Job # Amounts ordered: Whole pies Variety pack SO 60 Whole Unit cost Direct Material Units Total S Direct Labor Hours Cost/hr Totals Manufuring Overhead Cost driver Cost/unit of Total S Total cost for job per product Cost per unit Selling price per unit *Overhead Calculation -- desccription of method: Total overhead cost overhead cost cost driver cost driver rate de: Variety Unit cost Total $ Units Total S Total $ Hours Cost/hr Total S of Total $ Cost driver Cost/unit of Total S cost driver rate description Stage One A history of Humble Pies Humble Pies, Inc. is the genius of childhood neighbors and best friends Linda Jackson and Taylor Johnson. Though almost inseparable through high school, the two parted ways after graduation-Linda heading abroad to study the art of pasty making in some of the most elite patisseries in Paris, and Taylor pursuing his love of food (especially bacon) by landing jobs in some of the finest restaurants in their hometown of Charlotte, N.C. A chance encounter back in 2005 reunited the two and got them talking of their mutual love of food and what they'd been learning. Soon they were spending their free time crafting quirky but sophisticated (not to mention delicious) pies--passing them out to friends and family, and building a grassroots fan base around town. When the operation outgrew the Jackson family kitchen, Linda and Taylor applied for a small business loan. With it, they bought a small pie factory in Charlotte and became the proud owners of a 60,000 square-foot facility where they now produce high-quality pies. A couple years ago, as demand for the pies grew to a national market (thanks to the company's Instagram account), the co-owners hired a new Controller, a CPA with her Chartered Global Management Accountant (CGMA) designation from their CPA firm to help them continue to grow and stay profitable. Now they just landed their largest grocery store yet. In 2017, the company had $6.1 million in sales revenue and is on track to do $9.3 million this year. Humble Pies uses natural and organic ingredients, and combines Linda's Parisian techniques with Taylor's unexpected takes on classical southern desserts like Bacon Chocolate Chess, Avocado Key Lime and Chai Apple Pie. It offers two main product lines: 10-inch whole pies are pre-sliced, boxed and sold to distributors for food service applications or grocery in-store bakery cases. 10-inch variety pies are packed in strong, clear plastic domes to be sold in refrigerated cases and with custom labels. The variety packs contain two pieces of each kind of pie. Linda and Taylor love getting feedback from their fans and are always testing new recipes based on suggestions or grocer suppliers' needs. They often receive requests from food chains for different types and sizes of pies, and must decide which ones to accept and which ones to pass on. Pie production Naturally, Linda and Taylor can't reveal their recipes, but they have provided some details on how the pies are made. Most pies go through a general four-step process: mixing, filling, baking and packaging. Humble Pies makes five different crusts mixed in large batches, and fillings are produced in smaller batches depending on the production schedule. Next, crusts are placed in tins and filled with, well, the filling and baked for 45 minutes (20 at a time). After they've cooled for an hour, pies are decorated, sliced, packaged and labeled and placed on pallets to freeze until shipped. It takes about a week to complete a pie product order and the plant uses just-in- time production methods Since contaminated food would lead to a visit by the Health Department (and possibly shutting down the factory), there are at least three sanitation workers on duty at all times. Generally, there are 3-4 warehouse workers on duty to handle the shipping, receiving and storage of raw materials and finished product. The plant typically runs two shifts per day with two production supervisors assigned to each shift. For each of the two product lines, the process is combined in the same production line until the packaging area. The process is the same regardless of the flavors or ingredients for the production line (mixing taking about 3 minutes per pie, filling taking about 5 seconds per pie, and baking.) However, the processes between the product lines is very different in the packaging department, because the variety packs take much longer than for whole pies. Workers need to pull different flavor slices and place them in the same tin for the variety pack. Not to mention the packaging is different. The whole pies go in boxes while the variety pies go in lidded plastic containers. Both lines have similar labeling requirements. Humble Pies seldom places its own labels and logo on any of their products. Label designs generally come from the customer, so they vary based on each order. The plant currently has capacity to do $1 million in sales per month, but with additional investments in ovens, mixers and workstations for about $500,000) it could increase to $1.5 million October through December tends to be a higher volume period (with increased demand for holidays like Thanksgiving and New Year's), resulting in Humble Pies getting roughly 60% of its business during that time period. Because of the rush, the plant runs overtime and weekend shifts as needed to get the product to its suppliers. The owners believe the labeling process significantly slows down production time. Reports Humble Pies' managers rely heavily on a "Labor Report to manage its work force. The report lists four salaried workers and approximately 50 hourly employees, expected number of work days for the month, hours per day (typically B) and total projected hours for the month. The hours are multiplied by the employee pay rate (from $10.50-$15.50 per hour) to get expected monthly gross pay amount for each hourly employee based on a 40-hour workweek. Production workers are paid as following: Mixing workers cam $10.50/ht, Filling and baking workers earn $10.50/hr, Packaging workers earn $15.50/hr. The sum of all expected hourly employee gross monthly pay amounts are added to the salaried production workers gross monthly pay and the projected total payroll added costs (Employer taxes, Social Security, etc.) to get "total labor dollars" cost for the month. The total labor dollars workers are paid as following: Mixing workers earn $10.50/hr Filling and baking workers earn $10.50/hr, Packaging workers earn $15.50/hr. The sum of all expected hourly employee gross monthly pay amounts are added to the salaried production workers gross monthly pay and the projected total payroll added costs (Employer taxes, Social Security, etc.) to get "total labor dollars" cost for the month. The total labor dollars are divided by projected sales revenues to get a "projected labor percentage." Management watches this number pretty closely and tries to keep it around 20% of sales. In the past, it was assumed that labor costs for the company did not change with sales volume, and some months were profitable and some were not. Currently, Humble Pies' managers adjust labor hours up or down depending on the demand for pies and try to keep the projected labor near 20% of sales. Costing Issues Linda and Taylor are skilled at determining the cost of ingredients, but when it comes to labor and the overhead of each product line, they're not sure where to start. At the moment, Humble Pies allocates the same amount of overhead costs to every output unit. While total labor averages 20%, they believe that labor and overhead costs vary greatly by product line. And, since the company does not currently track labor hours by product line, Linda and Taylor have no idea of labor cost or profitability by product line. A digital biometric time clock keeps track of hours for the employees, but management is open to asking shift workers to track their hours by job or batch. Taylor and Linda's primary concern is making sure there is a good reason to change the method and that there's a simple and low-cost way to track it. The company has a small but growing administrative staff that can do some basic record keeping while the Controller manages financial reporting, taxes and decision analysis, a skill she developed while working toward her CGMA designation. The Controller has asked for help determining a product costing system Humble Pies can use for pricing decisions, product line profitability analysis, financial planning and helping managers understand the business. But costs are only one component. The company currently bases pricing decisions on the "three C's": cost,consumer and competition. As a bare minimum, the company wants to achieve a target 17% gross profit margin (or higher) on cost, but Linda and Taylor consider what a consumer is willing to pay the most important factor in pricing. They want to be sure to keep Humble Pies competitive with other companies. Table 1 provides selected actual cost and revenue data for May 2018. Additional information about costs can be found in the Notes to Selected Financial Data below. Layout of Production Facility: Warehouse Administration 15 of space Packaging variety packs 15% of space 20% of space Filing Dept. 10% of space Baking Dept 15% of space Packaging whole of Mixing Dept. 15% of space Sentation Net son Table 1: Selected Financial Data (actual cost and revenue data for May 2018) Cost Category Behavior May 2018 Sales $766,667 Expenses: Raw Materials 1 Variable 327,934 Bakery labor 2 Mixed 158,767 Administration Salaries Fixed 41,367 Supplies Variable 3,833 Freight & Shipping-in Variable 4,907 Freight & Shipping-Out Variable 64,707 Utilities - Electricity Variable 9,813 Utilities - Gas (ovens) Variable 3,067 Water Variable 920 Repairs & Maintenance Fixed 4,293 Telephone & Internet Fixed 2,300 Co-owners' salary Fixed 25,300 Depreciation Expense: Plant Building $9,460 Pastry Machines 6,920 Mixers 7,832 Filling Equip 7,471 Ovens 8,941 Warehouse Freezers 9.210 Total Depr. Fixed 49,834 Total Expenses 697,042 Operating Profit 69,625 Income Tax 22,280 Net operating income $47345 Unit volume (30,980 whole, 33,520 variety) Average Operating Assets Minimum Rate of Return 64,500 units $5,500,000 8.00% 1 Raw materials Crust ingredients ($.11) $7,120 Filling ingredients($4.65) 300,165 Packaging: Tins (5.08) 5,065 Labels (5.076) 4,916 Boxes ($.11) 3,617 Plastic containers (5.22) 2051 $327,934 2 Labor: Production Supervisors' Salaries $34,929 Production line wages ($10.50/hr) 51,613 Packaging labor ($15.50/hr): whole pies 7,016 variety pack 31,359 Sanitation wages ($15.50/hr) 18,940 Shipping & receiving wages ($15.50/hr) 14,910 $158,767 Notes to Selected Financial Data Raw Materials: Includes main ingredients and flavor additives. Main ingredients are relatively higher cost items such as flour, sugar, eggs, nuts and fruit that appear on the package label. Flavor additives are relatively low-dollar cost items and a small part of the weight of the pie such as spices, dyes, salt, and certain oils that don't always appear on the package label. Besides the crust and filling ingredients, raw materials include the tins, packaging and labels. Bakery labor: The cost amount consists of 22% supervisory salaries and taxes and the rest hourly workers. Bakery labor workers are organized into four categories: production line (mixing, filling and baking), packaging, sanitation and warehouse (all included as part of cost of goods sold). Administration Salaries: Includes taxes and benefits for the Vice President of Operations, the Controller, Human Resources Manager and two administrative support people. Supplies: Includes supplies relating to production, decorating, sanitation and warehouse (think: adhesive, pastry bags, spatulas, scrapers, icing pens, gloves and so on). Freight & Shipping-In: The costs of shipping raw ingredients and other materials to the factory from suppliers. Freight & Shipping-Out: The costs of shipping finished products to customer locations and distribution centers. Utilities Electricity: Approximately 10% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Utilities Gas (ovens): The factory portion varies with production volume. Water: All for sanitation and varies proportionately with production volume. Repairs & Maintenance: All for production. Telephone & Internet: All for the administrative office Co-owners' salary: Linda Jackson and Taylor Johnson. Brokers' commissions: Generally 4% of sales. Income Tax: Average total tax rate is 32%. Your team's assignment Linda and Taylor are asking several firms to provide a proposal recommending what type of costing approach will help them determine more accurate cost information for Humble Pies' pricing and product decisions. Your firm has been invited to provide a proposal. In no more than 1,000 words, write an executive summary addressing the issue (charts and tables with numerical values and calculations will not be included in the word count). Consider the following questions: 4. Complete an example job cost sheet using the methods you describe. If you need to make assumptions in order to complete the sheet indicate on the sheet how the figures were estimated