Question
Doughnut Delight is a 4th generation family-owned bakery based in Leicestershire. It has a large factory site and 100 stores across the Midlands region of
Doughnut Delight is a 4th generation family-owned bakery based in Leicestershire. It has a large factory site and 100 stores across the Midlands region of England.
Doughnut Delight use standard costing to control their costs. However, the cost-of-living increases mean that all the costs are rising and there is no potential to pass all of these onto the customers. Suppliers are increasing prices. In previous years contracts for prices could be agreed for a year. Now suppliers want to review their prices every two to three months. In the past year prices have increased by 20% for ingredients and over 700% for energy.
The organisation employs around 700 staff including the store staff. The factory contains around 40 skilled staff members and machines that are now 20-30 years old. The factory staff are very skilled. However, it is getting harder to recruit skilled staff. Only 10 staff are multiskilled and the rest are trained for specific roles. The head of the sweet bakery and savoury bakery departments have been there for over 40 years and are near to retirement.
Fridge and freezer space is an issue as there is not enough. The fridges and freezers are built in with no ability to move them. This does mean the flow of the work in the factory is restricted by where the fridges and ovens are.
Bread is made overnight, so it is ready the following morning for delivery to the shops. This means it is fresh every day. There are five mixing machines and a large gas travelling oven. This oven is only used for the bread as it is too costly to run for smaller batches of other products. They have a smaller oven which they run for the latter.
Waste is an issue. Experienced staff can use the correct amount of mixture/filling every time, but new staff cannot. Some pastry waste can be reworked into subsequent products, but this can only be done while it does not affect the quality of the products.
There is a mixture of machine prepared and made products and hand finished products. For example, scones are mixed by machines but stamped out by hand. Bread is made by machine but is packed by hand. The stores receive a tray of bread from the factory and then they package it instore.
Required:
Critically evaluate the use of standard costing in this environment. What suggestions could you make to Doughnut Delight to help them monitor their costs and improve their performance.
Good answers will link their comments to the scenario and the techniques studied in this module.
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