In this project, you will be opening your own specialty cookie company to see how product costing methods and changes in production affect business decisions. You will be creating a series of reports and analyzing the results using the template provided to guide you through the project.
The learning objectives of this project are as follows:
- Gain an understanding of product costing (direct materials, direct labor, and overhead).
- Review job order costing.
- Review process costing.
- Make business decisions based on analyzing accounting data.
You will prepare a four- to five-page written report (including spreadsheets) with at least three scholarly sources using the Unit II Project Template. Your report will provide the following information:
Part 1: Establish a cookie business selling only one type of specialty cookie with two employees making the cookies.
- Create a name and establish a location for the business.
- Construct a mission statement for the business.
- Decide on the type of cookie you want to make and sell.
Part 2: Develop costing and sales information for 1,000 cookies.
- Estimate and explain the cost per cookie based on job order costing (manufacturing overhead is 30% of direct labor costs). Prepare a job order cost sheet by researching and identifying the top five ingredients and their estimated costs as your direct materials. Research and identify the cost of wages for your two employees as your direct labor. It typically takes two days to make 1,000 cookies.
- Estimate and explain the cost per cookie based on process costing with 40% conversion costs. Identify the top three processes you feel are needed to make the cookies and prepare a production cost sheet for one of those processes.
- Estimate and explain the sales price you plan to set per cookie based on the cost data.
Part 3: Compare and contrast the costing methods used in this project, including which you believe provides the most useful information as a manager.
Part 4: Discuss what will happen to revenue if the number of the cookies sold increases or decreases.
Conclusion and Recommendations
Use the Unit II Cookie Project Spreadsheet Templates for your job order, and process costing spreadsheets to be embedded in your case study document.