T.O.TES. CASE STUDY TRILLIUM COMPANY DESCRIPTION AND OVERVIEW Tomia Odenburg and Tata Evans were lifc-long friends. One eamed a degree in accounting and the other became a nutritionist. Both were accomplished seamstresses were concerned about the impact plastic grocery bags had on the environment and had created reusable grocery bags for their personal use. After numerous compliments on the design and strength of their bags from store clerks and customers, they developed a business plan and started TOTES They called their version of the grocery bag a tote and sold them to grocery stores and small community farms. The company has grown ta rapidly and is now operating near capacity. EMPLOYEES Tonia is the president and Tara is the controller. Both individuals work full time and are salaried. Other employees include: Full-Time Salaried Employees Plant manager Plant maintenance supervisor Other ministrative staff(accountant, receptionist, finished goods warehouse manager) Hourly Employees: 3 employee(s) in the cutting department 2 employee(s) in the sewing department o 1 Part-time employee who operates the machine that prints logos on the totes The hourly employees are all considered direct labor employees. Historically, the hourly employees eam an average of S20 per hour, including fringe benefits and payroll taxes. All hourly employees work 40 hours each week, except for the part-time employee who works 20 hours each week T.O.T.E.S. CASE STUDY - TRILLIUM MATERIALS Each grocery bag requires 1/4 yard of 60" wide fabric and 1-12 yards of webbing, The fabric costs $3.60 per yard. Webbing costs $0.76 per yard. Thread is purchased in 500-yard spools and is considered an indirect material. After the totes pass quality control they are silk- screented with a customer's logo and the T.O.T.E.S. lubel is attached. Both the logo ink and the company labels are indirect materials. MANUFACTURING OVERHEAD TOTES allocates manufacturing overhead using a plantwide overhead rate based on machine bours in the cutting department. The cutting machines operate 95% of the hous worked by the cutting department employees. The plant operates 50 weeks per year. INVENTORY T.O.T.E.S. operates on a just-in-time basis in regards to both raw materials and finished goods. Work-in-process inventory is negligible at the end of each month. The company has found that it needs to have 20% of the following month's production requirements on hand at the end of each month in order to meet sales projections. They plan to have 5% of the fabric and 10% of the webbing required for the following month's production on hand at the end of each month. SALES FORECAST In the upcoming year, TOTES. management forecasted sales of 500,000 totes. Each tote sells for $4.95. Tura estimated annual revenue and expenses based on that level of sales and production. Her estimates are shown on Exhibit I-A. 5 JOB COSTING LAB2 T.O.T.E.S.currently uses a job costing system to allocate costs to each job. Although their products are very similar, cach customer requires a different logo on their custom tote. Furthermore, Tonia and Tara have started experimenting with different sizes and lines of product in order to expand their market. Lab 2 has three parts - caleulating standard costs, allocating costs to a specific job, and recording the flow of costs for that job. PART 1: Using the data from Lab I and the Company Description, students determine standard costs for direct materials, direct labor and for applied manufacturing overhead T.O.T.E.S. uses machine hours in the cutting department for allocating manufacturing overhead. Historical records show the cutting machines operate for 95% of the hours worked by the cutting department employees. The plant operates 50 weeks per year. The company has two cutting machines. Each machine can cut 150 totes cach hour. On Exhibit 2-A, calculate the standard number of direct labor hours (DLH) per tote for each activity in Step 1: calculate the estimated cutting machine hours (MH) per tote in Step 2: calculate the estimated total machine-hours per year in Step 3: and calculate the plantwide manufacturing overhead rate in Step 4. Using this information, create a Standard Cost Card for totes in Exhibit 2-B. PART 2: Costs for each job are tracked using a Job Cost Record (Exhibit 2-C). Copies of the Materials Requisition form and Labor Time Records have been copied so that students can complete the Job Cost Record for Job #2543. Complete the Materials Requisition document to calculate total cost of materials for Job #2543. All totes were completed but not shipped at the end of the month. PART 3: Using Exhibit 2-D, record the flow of costs for Job #2543 through the company's inventory accounts (Raw Materials, Work in Process, Finished Goods) to Cost of Goods Sold when product is shipped. 9 Bring laptop/mobile device to class to complete workbook or to show documentation to IA for exhibit 1-B. T.O.T.E.S. Operating Budget - 20xx $ 2,475,000 600,000 570,000 $ 1,170,000 120,000 7,500 80,000 $ 207,500 This section is for all product costs - 2 direct materials, 3 direct labor & 10 manufacturing overhead accounts. 4,200 7,600 38,000 14,000 26,000 32,000 $ SALES REVENUES COST OF GOODS SOLD COSTS (at standard) Direct Materials Fabric $ Webbing $ Direct Labor Wages- Cutting department $ Wages-Printing department $ Wages-Sewinging department Manufacturing Overhead Company Labels $ Depreciation Sewing Machines and cutting machines $ Factory Utilities (Mixed cost) $ Insurance-Plant $ Logo Ink $ Plant Maintance Supervisor Plant Manager $ Rent-Plant Building $ Repaires and maintenance-Plant $ Thread TOTAL COST OF GOODS SOLD (TOTAL PRODUCT COSTS) GROSS PROFIT SELLING, GENERAL AND ADMINISTRATIVE COSTS Administrative Office Supplies $ Administrative staff, e.eg. Accountant, ect. $ Administrative Payroll and Fringe $ Advertisting, Trade shows, Travel and Entertainment $ Depreciation Admin.Furniture and Equipment $ Equipment lease Administrative offices $ Excutive Salaries $ Freight and Postage-Administrative $ Insurance Company Liability $ Legal and Professional $ Rent-Administrative Building $ Sales Commissions Sales Salaries $ Shipping and Handling of Finished product (Selling) $ 68,000 42,000 27,000 50,000 $ $ 308,800 1,686,300 788,700 197,350 439,350 3,600 $ 125,000 $ 115,800 46,000 2,450 5,000 160,000 2,500 9,000 5,000 11,000 99,000 12,000 40,350 This section is for all period costs. $ TOTAL PERIOD COSTS 636,700 152,000 Hint: Operating Income will equal $152,000. OPERATING INCOME $ T.OTES. CASE STUDY - TRILLIUM All information is found in the Company Description and Information section and Lab 1. EXHIBIT 2-A: Calculate Standard Direct Labor Hours, Machine Hours & Predetermined Overhead Rate T.O.T.E.S. CALCULATING STANDARD COSTS Forecasted Production per year 500,000 totes DIRECT LABOR ACTIVITY STEP 1: Calculate Standard Direct Labor Hours per tote Cutting Sewing Printing a Enter average number of hours worked per week per employee b. Number of weeks plant operates each year c. Number of employees for each activity d. Total Direct labor hours (DLH) per year (a*b*c) e. DLH per tote (Step 1d + # totes produced) Round to 4 dedmal places STEP 2: Calculate Estimated Cutting Machine-Hours (MH) per tote a. Production capacity for ONE cutting machine totes/MH 1. Machine-hours per tote (1 + Step 2a amount) Round to 4 decimal places MH/tote STEP 3: Calculate Machine-Hours used per year a. 95% of Total Cutting Direct-Labor Hours (from Step 1d) MH/year STEP 4: Calculate Predetermined Overhead Rate (PDOHR) and Standard MOH per tote a. Total Estimated Manufacturing Overhead (from Exhibit 1-B) b. Total machine-hours per year (from Step 3A) c. Predetermined Overhead Rate (Step 4a +Step 46) Round to decimal places $ MH per MH 10 EXHIBIT 1-A: Classify costs as Period or Product (DM, DL or MOH) T.O.T.E.S. CLASSIFY COST Estimated Revenues And Expenses For Upcoming Year (pur on in the correct column) Forecasted Sales in units 500,000 Period Product Cost ACCOUNT NAME AMOUNT Cost DM DL MOH Sales Revenue $2.475,000 Expenses Administrative Office Supplies 3.600 Administrative Stall, e.g accountant, etc. 125.000 Adminstrative Payroll and Fringe 115,800 Advertising, Trade Shows, Travel & Entertainment 46,000 X Company Labels 4,200 X Depreciation - Admin. Furniture & Equipment 2,450 X Depreciation - Sewing Machines & Cutting Machines 7,600 X Equipment Lease - Administrative Offices 5,000 X Executive Salaries 160,000 X Fabric 600,000 Factory Utilities (mixed cost) 38,000 Freight & Postage - Administrative 2,500 Insurance - Company Liability 9,000 Insurance - Plant 14,000 Legal & Professional 5,000 X 26,000 Plant Maintenance Supervisor 32,000 Plant Manager 68,000 Rent - Administrative Building 11.000 X Rent- Plant Building 42,000 X Repairs and Maintenance. Plant 27,000 Sales Commissions 99,000 Sales Salaries 12,000 Shipping and Handling of Finished Product (Selling) 40,350 Thread 50,000 X Wages - Cutting Department 120,000 Wages - Printing Department 7,500 Wages Sewing Department 80,000 X 570,000 Logo Ink KA 44 Webbing Hint: There are 15 product costs, 5 of which are direct. Use Excel file for Lab 1 (found on Blackboard) BEFORE completing Exhibit 1-B. Bring file to lab so that you can correct any errors. Summarize the results on Exhibit 1-B below. EXHIBIT 1-B: Operating Budget Summary HINTS: T.O.T.E.S. Use Excel file to determine Operating Budget Summary - 20XX totals. at Standard SALES REVENUES $2,475,000 Include all COST OF GOODS SOLD (COGS) PRODUCT Direct Materials $1.170.000 Direct Labor $ 207.500 traditional Manufacturing Overhead (MOH) $ 308,800 TOTAL COST OF GOODS SOLD (PRODUCT COSTS) Leble 200 GROSS MARGIN 3788, og SELLING & ADMINSTRATIVE COSTS Total Selling $197.360 PERIOD expenses. Total Administrative $439,350 TOTAL SELLING & ADMIN. COSTS (PERIOD COSTS) $_10362.700 OPERATING INCOME (LOSS) $152.000 costs in COGS for a income statement. Include all T.O.TES. CASE STUDY TRILLIUM COMPANY DESCRIPTION AND OVERVIEW Tomia Odenburg and Tata Evans were lifc-long friends. One eamed a degree in accounting and the other became a nutritionist. Both were accomplished seamstresses were concerned about the impact plastic grocery bags had on the environment and had created reusable grocery bags for their personal use. After numerous compliments on the design and strength of their bags from store clerks and customers, they developed a business plan and started TOTES They called their version of the grocery bag a tote and sold them to grocery stores and small community farms. The company has grown ta rapidly and is now operating near capacity. EMPLOYEES Tonia is the president and Tara is the controller. Both individuals work full time and are salaried. Other employees include: Full-Time Salaried Employees Plant manager Plant maintenance supervisor Other ministrative staff(accountant, receptionist, finished goods warehouse manager) Hourly Employees: 3 employee(s) in the cutting department 2 employee(s) in the sewing department o 1 Part-time employee who operates the machine that prints logos on the totes The hourly employees are all considered direct labor employees. Historically, the hourly employees eam an average of S20 per hour, including fringe benefits and payroll taxes. All hourly employees work 40 hours each week, except for the part-time employee who works 20 hours each week T.O.T.E.S. CASE STUDY - TRILLIUM MATERIALS Each grocery bag requires 1/4 yard of 60" wide fabric and 1-12 yards of webbing, The fabric costs $3.60 per yard. Webbing costs $0.76 per yard. Thread is purchased in 500-yard spools and is considered an indirect material. After the totes pass quality control they are silk- screented with a customer's logo and the T.O.T.E.S. lubel is attached. Both the logo ink and the company labels are indirect materials. MANUFACTURING OVERHEAD TOTES allocates manufacturing overhead using a plantwide overhead rate based on machine bours in the cutting department. The cutting machines operate 95% of the hous worked by the cutting department employees. The plant operates 50 weeks per year. INVENTORY T.O.T.E.S. operates on a just-in-time basis in regards to both raw materials and finished goods. Work-in-process inventory is negligible at the end of each month. The company has found that it needs to have 20% of the following month's production requirements on hand at the end of each month in order to meet sales projections. They plan to have 5% of the fabric and 10% of the webbing required for the following month's production on hand at the end of each month. SALES FORECAST In the upcoming year, TOTES. management forecasted sales of 500,000 totes. Each tote sells for $4.95. Tura estimated annual revenue and expenses based on that level of sales and production. Her estimates are shown on Exhibit I-A. 5 JOB COSTING LAB2 T.O.T.E.S.currently uses a job costing system to allocate costs to each job. Although their products are very similar, cach customer requires a different logo on their custom tote. Furthermore, Tonia and Tara have started experimenting with different sizes and lines of product in order to expand their market. Lab 2 has three parts - caleulating standard costs, allocating costs to a specific job, and recording the flow of costs for that job. PART 1: Using the data from Lab I and the Company Description, students determine standard costs for direct materials, direct labor and for applied manufacturing overhead T.O.T.E.S. uses machine hours in the cutting department for allocating manufacturing overhead. Historical records show the cutting machines operate for 95% of the hours worked by the cutting department employees. The plant operates 50 weeks per year. The company has two cutting machines. Each machine can cut 150 totes cach hour. On Exhibit 2-A, calculate the standard number of direct labor hours (DLH) per tote for each activity in Step 1: calculate the estimated cutting machine hours (MH) per tote in Step 2: calculate the estimated total machine-hours per year in Step 3: and calculate the plantwide manufacturing overhead rate in Step 4. Using this information, create a Standard Cost Card for totes in Exhibit 2-B. PART 2: Costs for each job are tracked using a Job Cost Record (Exhibit 2-C). Copies of the Materials Requisition form and Labor Time Records have been copied so that students can complete the Job Cost Record for Job #2543. Complete the Materials Requisition document to calculate total cost of materials for Job #2543. All totes were completed but not shipped at the end of the month. PART 3: Using Exhibit 2-D, record the flow of costs for Job #2543 through the company's inventory accounts (Raw Materials, Work in Process, Finished Goods) to Cost of Goods Sold when product is shipped. 9 Bring laptop/mobile device to class to complete workbook or to show documentation to IA for exhibit 1-B. T.O.T.E.S. Operating Budget - 20xx $ 2,475,000 600,000 570,000 $ 1,170,000 120,000 7,500 80,000 $ 207,500 This section is for all product costs - 2 direct materials, 3 direct labor & 10 manufacturing overhead accounts. 4,200 7,600 38,000 14,000 26,000 32,000 $ SALES REVENUES COST OF GOODS SOLD COSTS (at standard) Direct Materials Fabric $ Webbing $ Direct Labor Wages- Cutting department $ Wages-Printing department $ Wages-Sewinging department Manufacturing Overhead Company Labels $ Depreciation Sewing Machines and cutting machines $ Factory Utilities (Mixed cost) $ Insurance-Plant $ Logo Ink $ Plant Maintance Supervisor Plant Manager $ Rent-Plant Building $ Repaires and maintenance-Plant $ Thread TOTAL COST OF GOODS SOLD (TOTAL PRODUCT COSTS) GROSS PROFIT SELLING, GENERAL AND ADMINISTRATIVE COSTS Administrative Office Supplies $ Administrative staff, e.eg. Accountant, ect. $ Administrative Payroll and Fringe $ Advertisting, Trade shows, Travel and Entertainment $ Depreciation Admin.Furniture and Equipment $ Equipment lease Administrative offices $ Excutive Salaries $ Freight and Postage-Administrative $ Insurance Company Liability $ Legal and Professional $ Rent-Administrative Building $ Sales Commissions Sales Salaries $ Shipping and Handling of Finished product (Selling) $ 68,000 42,000 27,000 50,000 $ $ 308,800 1,686,300 788,700 197,350 439,350 3,600 $ 125,000 $ 115,800 46,000 2,450 5,000 160,000 2,500 9,000 5,000 11,000 99,000 12,000 40,350 This section is for all period costs. $ TOTAL PERIOD COSTS 636,700 152,000 Hint: Operating Income will equal $152,000. OPERATING INCOME $ T.OTES. CASE STUDY - TRILLIUM All information is found in the Company Description and Information section and Lab 1. EXHIBIT 2-A: Calculate Standard Direct Labor Hours, Machine Hours & Predetermined Overhead Rate T.O.T.E.S. CALCULATING STANDARD COSTS Forecasted Production per year 500,000 totes DIRECT LABOR ACTIVITY STEP 1: Calculate Standard Direct Labor Hours per tote Cutting Sewing Printing a Enter average number of hours worked per week per employee b. Number of weeks plant operates each year c. Number of employees for each activity d. Total Direct labor hours (DLH) per year (a*b*c) e. DLH per tote (Step 1d + # totes produced) Round to 4 dedmal places STEP 2: Calculate Estimated Cutting Machine-Hours (MH) per tote a. Production capacity for ONE cutting machine totes/MH 1. Machine-hours per tote (1 + Step 2a amount) Round to 4 decimal places MH/tote STEP 3: Calculate Machine-Hours used per year a. 95% of Total Cutting Direct-Labor Hours (from Step 1d) MH/year STEP 4: Calculate Predetermined Overhead Rate (PDOHR) and Standard MOH per tote a. Total Estimated Manufacturing Overhead (from Exhibit 1-B) b. Total machine-hours per year (from Step 3A) c. Predetermined Overhead Rate (Step 4a +Step 46) Round to decimal places $ MH per MH 10 EXHIBIT 1-A: Classify costs as Period or Product (DM, DL or MOH) T.O.T.E.S. CLASSIFY COST Estimated Revenues And Expenses For Upcoming Year (pur on in the correct column) Forecasted Sales in units 500,000 Period Product Cost ACCOUNT NAME AMOUNT Cost DM DL MOH Sales Revenue $2.475,000 Expenses Administrative Office Supplies 3.600 Administrative Stall, e.g accountant, etc. 125.000 Adminstrative Payroll and Fringe 115,800 Advertising, Trade Shows, Travel & Entertainment 46,000 X Company Labels 4,200 X Depreciation - Admin. Furniture & Equipment 2,450 X Depreciation - Sewing Machines & Cutting Machines 7,600 X Equipment Lease - Administrative Offices 5,000 X Executive Salaries 160,000 X Fabric 600,000 Factory Utilities (mixed cost) 38,000 Freight & Postage - Administrative 2,500 Insurance - Company Liability 9,000 Insurance - Plant 14,000 Legal & Professional 5,000 X 26,000 Plant Maintenance Supervisor 32,000 Plant Manager 68,000 Rent - Administrative Building 11.000 X Rent- Plant Building 42,000 X Repairs and Maintenance. Plant 27,000 Sales Commissions 99,000 Sales Salaries 12,000 Shipping and Handling of Finished Product (Selling) 40,350 Thread 50,000 X Wages - Cutting Department 120,000 Wages - Printing Department 7,500 Wages Sewing Department 80,000 X 570,000 Logo Ink KA 44 Webbing Hint: There are 15 product costs, 5 of which are direct. Use Excel file for Lab 1 (found on Blackboard) BEFORE completing Exhibit 1-B. Bring file to lab so that you can correct any errors. Summarize the results on Exhibit 1-B below. EXHIBIT 1-B: Operating Budget Summary HINTS: T.O.T.E.S. Use Excel file to determine Operating Budget Summary - 20XX totals. at Standard SALES REVENUES $2,475,000 Include all COST OF GOODS SOLD (COGS) PRODUCT Direct Materials $1.170.000 Direct Labor $ 207.500 traditional Manufacturing Overhead (MOH) $ 308,800 TOTAL COST OF GOODS SOLD (PRODUCT COSTS) Leble 200 GROSS MARGIN 3788, og SELLING & ADMINSTRATIVE COSTS Total Selling $197.360 PERIOD expenses. Total Administrative $439,350 TOTAL SELLING & ADMIN. COSTS (PERIOD COSTS) $_10362.700 OPERATING INCOME (LOSS) $152.000 costs in COGS for a income statement. Include all