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Ken's Cookies Ken & Son manufactures oatmeal cookies in a plant spanning 8 0 , 0 0 0 square meters, with 7 5 % of

Ken's Cookies
Ken & Son manufactures oatmeal cookies in a plant spanning 80,000 square meters, with 75% of
that space devoted to cookie production and warehousing (i.e., manufacturing), and the remaining
25% allocated equ\cup ally to sales and marketing and administration (i.e., nonmanufacturing). The
plant capacity is roughly 1,700 batches per day (1 batch =1 dozen cookies); the plant operates
365 days a year. Revenue and expense information follow. Neither Ken nor his son had any
involvement with manufacturing and their salaries were thus considered nonmanufacturing
expenses. All nonmanufacturing costs, except for sales commissions, were considered fixed.
Ken & Son
Noter:
(a) In 2007, Ken sold 3.38 million cookies at a price of $0.50 per cookie.
(b) The production supervisor was not an hourly direct labor employee; Ken paid him a fixed salary.
(c) Electricity charges for the ovens varied with the intensity of the production schedule: more
cookies
baked meant the ovens were heated longer. Electricity charges for the freezer, however,
were
constant, regardless of production levels. Ken estimated that 40% of the electricity bill related to
the freezers (a fixed cost), with the rest associated with the ovens (a variable cost).
(d) General utility charges related to the lighting and climate controls for the entire plant
and were considered fixed as the plant operated year round.
(e) Maintenance and cleaning charges mostly varied with production levels ( $0%), but a small
portion
(20%) existed regardless of the number of cookies being produced and were considered fixed.
These charges applied to production facilities only.
(f) This included items such as spoons and spatulas and was classified as variable overkead.
Assignments:
Classify the costs based on cost behavior and cost type.
Update T-accounts for the year
Prepare cost of goods manufactured statement
Prepare gross margin formatted statements of income for Ken & Son for the year ended August 2007.
Prepare contribution margin formatted statements of income for Ken & Son for the year ended August 2007.
Reconcile absorption costing (GM statement) and variable costing (CM statement) profits. There are no differences between
applied and incurred overhead so not adjustment to COGS is necessary.
The beinning balances were provided under the heading ending inventory values for both 2006 and 2007 ending balances for the T-Accounts. Sorry I know there is allot of information ,I really appriciate your help

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