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. 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. 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): Approximately 5% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Water: All for the factory and varies proportionately with production volume. Repairs \& Maintenance: All for the factory. Rent expense: The factory uses about 85% of the total square footage of the building and the remainder is for the administrative office. Telephone & Internet: All for the administrative office. Co-owners' salary: Elizabeth Madrid and Alicia Lee. Brokers' commissions: Generally, 4% of sales. Income Tax: Average total tax rate is 32%. Your team's assignment Elizabeth and Alicia are asking several firms to provide a proposal recommending what type of costing approach will help them determine more accurate cost information for Piece of Cake Pies' pricing and product decisions. Your firm has been invited to provide a proposal. In no more than 1,000 words, write an summary addressing the following questions (charts and tables with numerical values and calculations will not be included in the word count): 1. What information does Piece of Cake Pies need? Before recommending a cost system, it is helpful to understand a company's information needs. Based on case information, discuss the types of cost information Piece of Cake Pies' product costing system should be able to provide. 2. Of the expenses listed in Table 1, determine which should be treated as product costs and which should be treated as period costs for management decision making? 3. For each product cost you identified, how would you track the cost? For example, would you track it by individual job, batch, production step, activity, general factory overhead, etc.? Separate raw materials into main ingredients and flavor additives. Also, separate bakery labor into four categories: production line (includes mixing, filling and baking), packaging, sanitation and warehouse
