Tasty Bread makes and supplies bread throughout the state of Kansas. Three types of bread are produced: loaves, rolls, and buns. Seven operations describe the production process.
a. Mixing: Flour, milk, yeast, salt, butter, and so on, are mixed in a large vat.
b. Shaping: A conveyor belt transfers the dough to a machine that weighs it and shapes it into loaves, rolls, or buns, depending on the type being produced.
c. Rising: The individually shaped dough is allowed to sit and rise.
d. Baking: The dough is moved to a 100-foot-long funnel oven. (The dough enters the oven on racks and spends 20 minutes moving slowly through the oven.)
e. Cooling: The bread is removed from the oven and allowed to cool.
f. Slicing: For loaves and buns (hamburger and hot dog), the bread is sliced.
g. Packaging: The bread is wrapped (packaged).
Tasty produces its products in batches. The size of the batch depends on the individual orders that must be filled (orders come from retail grocers throughout the state). Usually, as soon as one batch is mixed, a second batch begins the mixing operation.
Required:
1. Identify the conditions that must be present for operation costing to be used in this setting.
If these conditions are not met, explain how process costing would be used. If process costing is used, would you recommend the weighted average method or the FIFO method?
Explain.
2. Assume that operation costing is the best approach for this bread manufacturer. Describe in detail how you would use operation costing. Use a batch of dinner rolls (consisting of 1,000 packages of 12 rolls) and a batch of whole wheat loaves (consisting of 5,000, 24-oz. sliced loaves) as examples.