Topic you will launch your own specialty cookie company to see howproduct costing methods and changes in production affect business decisions

The cost per cookie based on job order costing: To calculate the cost per cookie in this job by using job-order costing system, we have to calculate three different statistics of costs

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATION PROGRAMS

₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋۝₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋

GROUP ASSIGNMENT

Cost AccountingTopic: You will launch your own specialty cookie company to see how product costing methods and changes in production affect business decisions

Student Names: Nguyễn Hữu Phát – 11214657

Phạm Hồng Phúc – 11214709 Nguyễn Trần Anh Trí – 11215952

Instructor: Associate Professor Dr.Nguyễn Thị Thu Liên Date: 06-05-2023

TABLE OF CONTENTS

ABSTRACT

INTRODUCTION

PART I: ESTABLISH COOKIES COMPANY

PART II: COSTING AND SALE INFORMATION

1

a Direct Materials Cost

b Direct labor cost

2 Job order costing method

3 Process costing method

PART III: COMPARE AND CONTRAST COSTING METHOD

1 Similarities and differences between two methods

a Similarities

b Differences

2 Comments about both methods

PART IV: VARIANCES IN PRODUCTION - COSTS AND REVENUES

1 Job order costing method

2 Process costing method

CONCLUSION

REFERENCE

This is a preview

Do you want full access? Go Premium and unlock all 16 pages

Access to all documentsGet Unlimited DownloadsImprove your grades

Welcome to VIN-COOKI, a cookie company located in Hanoi, Vietnamthat takes pride in offering delicious treats to satisfy your sweet tooth Wespecialize in crafting handmade cookies with the finest ingredients, ensuring thatevery bite is a delectable experience In this report, we will explore the mission ofVIN-COOKI, the ingredients we use in our cookies, and the values that guide ourcompany We will also highlight the importance of high-quality ingredients and theunique flavors that make our cookies stand out

Ironically, for the business to achieve efficiency and high revenue, it requires

a correct strategy to analyze the market that we enter, including competitors,consumer tastes, and many other factors As the proprietor of the specialty cookieenterprise, our goal is to sell only one variety of cookie with two staff The costingand sales data for generating 1,000 cookies using job order costing and processcosting are the main topics of the paper The report also compares and contrasts thetwo pricing approaches and discusses their relative merits The paper also looks atproduction variations' effects on costs and income for the cookie industry

PART I: ESTABLISH COOKIES COMPANY

· Name of the company:VIN-COOKI

VIN-COOKI stands for Vietnam Cookies We create a brand by Vietnamesepeople for Vietnamese people We want to create a prestigious and quality brand toserve the Vietnamese people And more than that, we also want to bring VIN-COOKI to the world and make VIN, meaning Vietnam, imprinted in their minds

· Our logo:

· Mission statement:

At our cookie business, we are committed to bringing joy to our customerswith every delicious bite We believe in using only the finest ingredients andcrafting each cookie with care and attention to detail Our mission is to create amemorable and delightful experience for our customers, while also fostering asense of community and connection through our cookies.

Type of cookies:

Today's market offers a wide variety of biscuits, so we decided to stand out

by selecting almond butter cookies The common ingredient, almond, is what sets

us apart from our related competitors These melt-in-your-mouth almond biscuitsresemble the softest shortbread you've ever tasted because they are made withhigh-fat, cultured butter They are very attractive when topped with sliced almondsand a simple confectioners' sugar icing, but you could omit the garnish forsomething cleaner and easier At the end of this part, we are able to argue that VIN-COOKI, along with the company's primary efforts, has the ability to attractcustomers in a more successful and active way

This is a preview

Do you want full access? Go Premium and unlock all 16 pages

Access to all documentsGet Unlimited DownloadsImprove your grades

PART II: COSTING AND SALE INFORMATION

1 Prime costs:

a Direct Material Costs:

No Materials Calculation Units Quantity Price (VNĐ) Total

b Direct Labor Costs:

- Direct labor includes the wages paid to employees who make thecookies For this job, with a quantity of 1000 pieces of butter almondcookies, along with the requirement for experience and baking skills of theemployees, we have decided to hire two workers for 2 days, 8 hours per day,and the hourly wage is 38,000 VND per person

2 The cost per cookie based on job order costing:

To calculate the cost per cookie in this job by using job-order costing system,

we have to calculate three different statistics of costs: direct materials, directmanufacturing labor and manufacturing overhead:

● Total direct material Cost: 2.230.486 (VNĐ)

● Direct labor Cost:

- Direct Labor cost per employee per hour: 38.000 (VNĐ)

-> Direct labor cost per employee = 38.000 x 8 x 2 = 608.000 (VNĐ) -> Total Direct labor cost: 1.216.000 (VNĐ)

● Manufacturing overhead cost:

- Manufacturing overhead rate is 30% of direct labor costs

-> Total manufacturing overhead cost: 364.800 (VNĐ)

As we can see from this sheet, the cost per cookie is 3.811,29 (VNĐ) Our company, VIN-COOKI, specializes in supplying biscuit products tocustomers both domestically and internationally With such a large scale, weaim for a profit margin of nearly 55% for our sales Therefore, the price percookie will be 6.000 VNĐ

3 The cost per cookie based on process costing:

By using the process costing system, each cookie will go through three stages:Mixing department, Add-ins department and Packaging department

- The cost of each material used in each process will be charged to thatprocess

- Manufacturing overhead cost in the Mixing Department: 145.920 VNĐ:includes:

● Fixed Costs: Depreciation expenses: 65.920 VND/ 2 days

● Variable Costs: Electric expense: 80,000 VND/ 8 hours

- The cookies will be in the Mixing Department for a total of eight hours, inthe Add-ins department for a total of four hours and in the Packagingdepartment for a total of four hours

- The cookies will only be 40% complete before they are transferred to theAdd-ins Department and 90% complete before they are transferred to thePackaging Department

○ Manufacturing overhead costs of the Mixing departmentaccount for 40% of total Manufacturing Cost

○ Manufacturing overhead costs of the Add-ins departmentaccount for 50% of total Manufacturing Cost

○ Manufacturing overhead costs of the Packaging departmentaccount for 10% of total Manufacturing Cost

Assume there is no beginning inventory of any kind During 2 days,

1000 cookies were placed into production and all 1000 were fullycompleted at the end of day 2

This is a preview

Do you want full access? Go Premium and unlock all 16 pages

Access to all documentsGet Unlimited DownloadsImprove your grades

According to these sheets, the cost of per unit of Job #666 is 3.811,29

The profit our company wants is nearly 55%, so we will earn 6.000 VND per cookie

PART III: COMPARE AND CONTRAST COSTING METHOD

1 SIMILARITIES AND DIFFERENCE BETWEEN THE TWO METHODS 1.1 Similarities

The manufacturing procedure for both approaches is the same (mixing,granulating, and packing), as are the overall expenses (direct material expenses,direct labor costs, and production costs) are the same (shared output).

1.2 Differences

Product type

The kind of product and its distinctiveness are two key distinctions between joborder costing and process costing For small quantities of products that can becustomized or are one-of-a-kind, as well as for single work orders, firms utilize joborder costing; for mass-produced or standardized products, they use processcosting In process costing, the manufactured goods are frequently the same orextremely comparable

For a retail business manufacturing a customer's order of personalized pens, forinstance, task order costing may be helpful Process costing, however, may bemore appropriate if the business produces pens in large quantities

Industry

Different sectors frequently favor either job order costing or process costing.Retail businesses and hospitals are typical examples of industries that use taskorder costing to make unique or customized orders for individual consumers.Process costing is frequently used by sectors of the economy that mass-produceone product or a group of related products

Job size

The size of the job is another distinction between process costing and job ordercosting Smaller jobs or orders normally call for the use of job order costing, butbigger production jobs usually call for process costing One minor work that acompany might price using job order costing is a customer's custom furnitureorder To keep tabs on the expenses of manufacturing a sizable order of furniture inbulk, a company might employ process costing

Cost accumulation

For task order costing and process costing, the technique of cost buildup differs

as well Costs are built up by individual jobs in the job order costing method Workcosting typically includes client billing to detail the precise cost of each step in the

process of a certain work or order Costs accumulate by each process or processingdepartment in process costing, which may not be focused on the precise cost ofeach item in the process.

Cost reduction

The possibility of cost reduction, which refers to actions that businesses mighttake to lower their cost of production and boost profits, is another distinctionbetween the two forms of costing While process costing gives businesses a variety

of cost-saving options, task costing often offers fewer of them

Work in progress

The term "work in progress" (WIP) refers to the expenses associated withunfinished goods, including labor and material expenditures Businesses typicallydon't combine work in progress with task order costing However, as productsmove between divisions, organizations could record work in progress while usingprocess pricing

Record keeping

For job order costing and process costing, businesses maintain records indifferent ways Typically, each job has its own inventory account in systems thatuse job order costing Due to the fact that work order costing uses materials andother resources to track costs for each component of a job, it often necessitatesmore thorough record-keeping than process costing In contrast, each production orprocess department has its own inventory account in systems that use processcosting, and costs are accumulated in these accounts

Examining and assessing:

Through the research shown above, it is clear that both job-order costing andprocess costing have unique methodologies for calculating costs, each with uniquebenefits and drawbacks According to:

Firstly, because it is intimately related to the manufacture of finished items,

the product cost component contributes significantly to both costingmethodologies, accounting for a sizable percentage The variance in direct labor

This is a preview

Do you want full access? Go Premium and unlock all 16 pages

Access to all documentsGet Unlimited DownloadsImprove your grades

and material costs will have a bigger impact on the change in total costs than thedifference in processing costs.

Secondly, employing a job-order costing approach will simplify the procedure

and save the accountant time and effort The accountant will need a lot of time andeffort to complete the process-costing method, which, on the other hand, proved to

be difficult

Thirdly, conversion costs are the expenses necessary to turn direct materials

into a final product Direct labor and manufacturing overhead are included in thiscategory since they include other expenses that are not considered direct materials

or direct labor Additionally, those and the direct material costs are included in theproduct costs However, if the process costing technique is used, the manufacturingoverhead comprises constant and variable costs that fluctuate in response tochanges in production scale, meaning that the cost of the finished product is moreclosely related to conversion costs than to product prices The manufacturingoverhead is distributed in accordance with the direct labor cost (equal 30% ofdirect labor costs) when the job order costing method is used; therefore, the finalproduct cost changes are more influenced by product cost than by conversion cost

To sum up, process costing will give business owners an easier time trackingthe costs of each stage than cost by order and will therefore give them more fullinformation about costing throughout production phases than job costing Inaddition, based on the type of costs involved, we may rapidly pinpoint the reasonfor any unusual rise in (or decrease in) the cost of completed goods at the point ofsale As a result, it offers more pertinent information to assist business leaders inmaking quick decisions that are well-informed

PART IV: VARIANCES IN PRODUCTION - COSTS AND REVENUES 4.1 The variances in job order costing system:

-> In conclusion, when we give the same expected profit, total cost and totalrevenue will be proportional to the quantity of units.

4.2 The variances in process costing cost:

Therefore, when production output increases, average revenue and averageprofit per equivalent unit will decrease for companies that want to make a profit of155% of production costs.

Thus, based on the analysis presented above, we can clearly see how changes inthe production output level have an impact on the job order costing system, theprocess costing system, and the company's revenue Managers must develop andselect a strategy that is appropriate for the company's strategy based on thisinformation

This is a preview

Do you want full access? Go Premium and unlock all 16 pages

Access to all documentsGet Unlimited DownloadsImprove your grades

The study has improved our knowledge of two approaches for calculatingcost and how to use them in real-world situations, as well as how to determineproduct cost While there are numerous parallels between the two approaches,there are also a lot of variances, each with unique benefits and drawbacks If job-based costing is appropriate for businesses that produce goods in response toorders and that use closed technological processes, then the approach ofdetermining cost by production process is appropriate for businesses thatmanufacture goods make goods using a variety of processing processes in parallel

or continuously, in accordance with technological principles Consequently, theappropriate implementation of the cost calculation approach will assist the business

in operating more efficiently and lowering business risks

The impact of production modifications on costs, receipts, and profits is also moreclearly illustrated in this report Based on that, it will assist managers in developingsmart business plans and strategies to support the company's objectives

REFERENCE