One of the products your company produces is sandwich cookie snack packs. There are three main processes used to make the cookies. The first process preps and mixes the ingredients into the cookie and the filling. The second process shapes, forms and bakes the cookies. The third process packages the cookies. The cookies are sold in cases of 30 cookie packs (1 case is a unit)

Information on the direct materials is listed in table 1. Consider this information the standard. Direct labor information given in Table 2. Consider this information the standard.

Annual overhead information is given in Table 3. Overhead is allocated based direct labor hours. Estimated annual direct labor hours are 549,000. Calculate a predetermined OH rate (round to two decimal places if needed). Use this rate when you need to apply OH.

Table 4 gives you the information for the last six months on the manufacturing overhead cost and machine hours. Using the high/low method of cost estimation and this information, determine the fixed and variable portions of the manufacturing overhead cost. (You will need this information to complete Table 5). Machine hours have been determined as the best cost driver for manufacturing OH. It takes one machine hour to make 200 cases of cookies.

Table 5 is where you will list all your production cost (DM, DL, MOH), separated into their fixed and variable components. Note this table wants variable cost per unit and annual fixed cost.

Cost-Volume-Profit (CVP) Relationships

Selling Price: You sell a case of cookies for $22.

Breakeven point: Calculate the annual breakeven point using manufacturing cost. Be sure to include the fixed component of mixed cost in your fixed costs and the variable component in the variable cost. Show your breakeven in Sales units and in Sales Dollars

Profit Planning: Determine the number of units you must sell to make an annual gross profit using 3 assumptions concerning your gross profit, both in sales units and sales dollars.

Aggressive Profit ($34,125,000)

Conservative Profit ($11,750,000)

Average Profit ($21,763,600)

Budgeting

Create a sales budget using the information for earning an average gross profit for the year. You will break the budget down into the four quarters for the year. (Sales tend to be consistent each quarter, you can only sale a whole unit so round-up if necessary) Use table 6 to complete the sales budget.

Create a production budget for each quarter of the year (keep it in quarters; you do not need to break it down by month). You desire to keep 10% of next quarters sales in ending inventory. Sales for Qtr 1 the following year (year 2) are expected to be 450,000 cases of cookies. There is not any beginning finished goods inventory for quarter one this year. Use table 7 to complete the production budget.

Running quarter two -- Weighted-average process costing. Table 8 presents the information for the packaging department. Complete the questions under table 8.

Actuals are in for quarter two. You sold 3% less units than you budgeted for (round to a whole unit), but price per unit was $22.50.

Calculate revenue

Compute the cost of goods sold (total and per unit) before adjusting for actual OH cost. The beginning finished goods inventory for Q2 was 43,000 units at a total cost of $434,300.

Actual filling ingredients usage for quarter one was 41,325,000 grams at a price of $0.0082 per gram. Actual equivalent units of production (cases of cookies) completed through the second process (where the filling is added) was 462,000. Calculate the direct materials variances for the filling (price, usage, and total) and indicate if these variances are favorable or unfavorable.

Actual direct labor hours for the quarter were 139,810 at an average rate of $18.50 per hour. For actual production, you expected to use 140,490 direct labor hours. Calculate the direct labor variances (rate, efficiency and total) and indicate if these variances are favorable or unfavorable.

For July, you have received a special offer of 8,000 cases of cookies at a total price of $80,000. Your current production capacity per month is 200,000 cases. At the end of June finished goods ending inventory was 48,750 cases. The event organizers ordering these cookies have requested a special summer themed wrapping that will cost $1,800 for you to set-up. Should you accept or reject this offer? Why?

Determine over- or under-applied overhead and close to cost of goods sold. Actual OH costs are given in table 13 (look at #11 for actual DL hours used to apply OH). Determine the new cost of goods sold amount.

Table 1: Direct Materials

Material	Quantity per unit	Cost	Total per unit
Cookie Ingredients	240 grams	$0.0065	$1.56
Filling	90 grams	0.0080	0.72
Packaging 1	1 box	0.2000	0.20
Packaging 2	30 wrappers	0.0250	0.75
Total cost	-	-	$3.23

Table 2: Direct Labor

Job description	Hours per unit	Rate	Total cost
Processor	0.20	$18.00	$3.60
Baker	0.05	18.00	0.90
Packager	0.06	18.00	1.08
Total cost	-	-	$5.58

Table 3: Yearly Overhead Costs

Cost description	Amount
Indirect material	$129,600
Indirect labor	144,000
Machine Maintenance	64,000
Electricity	68,000
Depreciation	97,200
Quality testing	156,000
Total	$658,800

Predetermined OH rate:

Table 4 Actual Overhead cost for the last six months

Month	Machine hours	OH Cost
Month 1	650	$53,200
Month 2	700	$54,700
Month 3	680	$54,100
Month 4	690	$54,400
Month 5	660	$53,600
Month 6	670	$53,800

*200 cases produced per machine hour

If a cost is mixed, put the fixed amount in the fixed column and the variable amount in the variable column, as demonstrated in the table below.

Table 5: Variable and Fixed Costs

COSTS Description	VARIABLE Cost per unit	FIXED Cost per Year
-	-	-
-	-	-
-	-	-
TOTAL	-	-

Table 6 Sales Budget (Q1, Q2, Q3, Q4)

(Create for each quarter)

Table 7 Production Budget

-	Qtr 1	Qtr 2	Qtr 3	Qtr 4
-	-	-	-	-
-	-	-	-	-
-	-	-	-	-
-	-	-	-	-
-	-	-	-	-

Process Costing Packaging Department

Direct materials are added 90% at the beginning of the process and the remaining 10% are added when the cookies are 80% complete with the packaging process. Direct labor and overhead are added evenly throughout the process.

Table 8 Unit and cost information

		Cost
	Physical Units	Transferred-in	Direct Materials	Direct Labor	Overhead
Beg WIP	24,000 (80% complete)	$171,000	$21,200	$20,167.60	$1,382.40
Transferred In	420,000	$3,345,480
End WIP	26,000 (75% complete)

Added during Qtr 2:

Direct Materials -- $402,544

Direct Labor 26,000 hrs @ $18.50 per hour

Overhead OH is applied based on predetermined OH rate and actual DL hours

Determine the number of units completed during quarter 2.

Compute the equivalent units using the weighted average method.

Compute the cost per equivalent unit using the weighted average method

Compute the cost of goods transferred to finished goods inventory

Compute the ending balance in WIP, Packaging

Table 9 Actual Results (calculate revenue and COGS)

	Units sold	Sales Price/Cost per unit	Revenue/COGS
Revenue
Cost
Gross Profit

Table 10 DM Variances (filling only)

Variance Type	Amount
Price Variance
Usage Variance
Total Variance

Calculations:

Table 11 Direct Labor Variances

Variance Type	Amount
Rate Variance
Efficiency Variance
Total Variance

Calculations:

#12 Accept or Reject Special Order? Why?

Table 13 Actual OH cost for Quarter 2

Description	Cost
Indirect Materials	$32,400
Indirect Labor	$37,000
Machine Maintenance	$17,400
Electricity	$18,200
Depreciation	$24,300
Quality Testing	$43,820

Amount of applied OH:

Amount of actual OH:

Under or Over- Applied Amount:

New COGS amount: