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

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATION PROGRAMS ₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋‫۝‬₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋₋ GROUP ASSIGNMENT Cost Accounting Topic: 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 a Direct Materials Cost b Direct labor cost Job order costing method Process costing method PART III: COMPARE AND CONTRAST COSTING METHOD Similarities and differences between two methods a Similarities b Differences Comments about both methods PART IV: VARIANCES IN PRODUCTION - COSTS AND REVENUES Job order costing method Process costing method CONCLUSION REFERENCE This is a preview Do you want full access? 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Log in ABSTRACT Welcome to VIN-COOKI, a cookie company located in Hanoi, Vietnam that takes pride in offering delicious treats to satisfy your sweet tooth We specialize in crafting handmade cookies with the finest ingredients, ensuring that every bite is a delectable experience In this report, we will explore the mission of VIN-COOKI, the ingredients we use in our cookies, and the values that guide our company We will also highlight the importance of high-quality ingredients and the unique flavors that make our cookies stand out INTRODUCTION 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 cookie enterprise, our goal is to sell only one variety of cookie with two staff The costing and sales data for generating 1,000 cookies using job order costing and process costing are the main topics of the paper The report also compares and contrasts the two pricing approaches and discusses their relative merits The paper also looks at production 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 Vietnamese people for Vietnamese people We want to create a prestigious and quality brand to serve the Vietnamese people And more than that, we also want to bring VINCOOKI 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 customers with every delicious bite We believe in using only the finest ingredients and crafting each cookie with care and attention to detail Our mission is to create a memorable and delightful experience for our customers, while also fostering a sense 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 biscuits resemble the softest shortbread you've ever tasted because they are made with high-fat, cultured butter They are very attractive when topped with sliced almonds and a simple confectioners' sugar icing, but you could omit the garnish for something cleaner and easier At the end of this part, we are able to argue that VINCOOKI, along with the company's primary efforts, has the ability to attract customers in a more successful and active way This is a preview Do you want full access? 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Log in PART II: COSTING AND SALE INFORMATION Prime costs: a Direct Material Costs: No Materials Calculation Units Quantity Price (VNĐ) Total Flour gram 6200 39 241.800đ Butter gram 4520 250 1.130.000đ Sugar gram 2600 44 114.400đ Egg egg(s) 40 3.500 140.000đ Vanilla ml 160 964.28 154.286đ Sliced Almond gram 1000 350 350.000đ Packs unit(s) 1000 100 100.000 b Direct Labor Costs: - Direct labor includes the wages paid to employees who make the cookies For this job, with a quantity of 1000 pieces of butter almond cookies, along with the requirement for experience and baking skills of the employees, we have decided to hire two workers for days, hours per day, and the hourly wage is 38,000 VND per person 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, direct manufacturing 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 x = 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 to customers both domestically and internationally With such a large scale, we aim for a profit margin of nearly 55% for our sales Therefore, the price per cookie will be 6.000 VNĐ 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 that process - Manufacturing overhead cost in the Mixing Department: 145.920 VNĐ: includes: ● Fixed Costs: Depreciation expenses: 65.920 VND/ days ● Variable Costs: Electric expense: 80,000 VND/ hours - The cookies will be in the Mixing Department for a total of eight hours, in the Add-ins department for a total of four hours and in the Packaging department for a total of four hours - The cookies will only be 40% complete before they are transferred to the Add-ins Department and 90% complete before they are transferred to the Packaging Department ○ Manufacturing overhead costs of the Mixing department account for 40% of total Manufacturing Cost ○ Manufacturing overhead costs of the Add-ins department account for 50% of total Manufacturing Cost ○ Manufacturing overhead costs of the Packaging department account for 10% of total Manufacturing Cost Assume there is no beginning inventory of any kind During days, 1000 cookies were placed into production and all 1000 were fully completed at the end of day This is a preview Do you want full access? 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Log in 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 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 job order costing and process costing For small quantities of products that can be customized or are one-of-a-kind, as well as for single work orders, firms utilize job order costing; for mass-produced or standardized products, they use process costing In process costing, the manufactured goods are frequently the same or extremely comparable For a retail business manufacturing a customer's order of personalized pens, for instance, task order costing may be helpful Process costing, however, may be more 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 task order costing to make unique or customized orders for individual consumers Process costing is frequently used by sectors of the economy that mass-produce one product or a group of related products Job size The size of the job is another distinction between process costing and job order costing Smaller jobs or orders normally call for the use of job order costing, but bigger production jobs usually call for process costing One minor work that a company might price using job order costing is a customer's custom furniture order To keep tabs on the expenses of manufacturing a sizable order of furniture in bulk, 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 Work costing 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 processing department in process costing, which may not be focused on the precise cost of each item in the process Cost reduction The possibility of cost reduction, which refers to actions that businesses might take to lower their cost of production and boost profits, is another distinction between 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 with unfinished goods, including labor and material expenditures Businesses typically don't combine work in progress with task order costing However, as products move between divisions, organizations could record work in progress while using process pricing Record keeping For job order costing and process costing, businesses maintain records in different ways Typically, each job has its own inventory account in systems that use job order costing Due to the fact that work order costing uses materials and other resources to track costs for each component of a job, it often necessitates more thorough record-keeping than process costing In contrast, each production or process department has its own inventory account in systems that use process costing, and costs are accumulated in these accounts 3.2 Comments about both methods Examining and assessing: Through the research shown above, it is clear that both job-order costing and process costing have unique methodologies for calculating costs, each with unique benefits and drawbacks According to: Firstly, because it is intimately related to the manufacture of finished items, the product cost component contributes significantly to both costing methodologies, accounting for a sizable percentage The variance in direct labor This is a preview Do you want full access? 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Log in and material costs will have a bigger impact on the change in total costs than the difference 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 and effort 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 this category since they include other expenses that are not considered direct materials or direct labor Additionally, those and the direct material costs are included in the product costs However, if the process costing technique is used, the manufacturing overhead comprises constant and variable costs that fluctuate in response to changes in production scale, meaning that the cost of the finished product is more closely related to conversion costs than to product prices The manufacturing overhead is distributed in accordance with the direct labor cost (equal 30% of direct labor costs) when the job order costing method is used; therefore, the final product cost changes are more influenced by product cost than by conversion cost To sum up, process costing will give business owners an easier time tracking the costs of each stage than cost by order and will therefore give them more full information about costing throughout production phases than job costing In addition, based on the type of costs involved, we may rapidly pinpoint the reason for any unusual rise in (or decrease in) the cost of completed goods at the point of sale As a result, it offers more pertinent information to assist business leaders in making quick decisions that are well-informed PART IV: VARIANCES IN PRODUCTION - COSTS AND REVENUES 4.1 The variances in job order costing system: Note: As we can see from this table, although the quantity of units has changed, the cost per unit is still the same at 3.811,286 VND/unit This occurs because direct materials cost and direct labors cost due to a change in the number of units produced; Manufacturing overhead cost changes based on the change of direct labors cost Therefore, when we calculate the cost per unit by dividing the total cost by the production levels, it will give the same result -> In conclusion, when we give the same expected profit, total cost and total revenue will be proportional to the quantity of units 4.2 The variances in process costing cost: Note: The table shows that, when using the process costing approach in the mixing department, direct material cost and direct labor cost will vary in direct proportion to the amount of production As a result, the production cost is constant per equivalent unit The company's cost per equivalent unit at the current level of production, however, is radically different (in particular, it rapidly declines as the level of production rises) This occurs because manufacturing overhead costs, which comprise variable and fixed costs (e.g., power prices of 10,00 VND per hour and depreciation costs of 65.920VND/two days), gradually decrease as production levels rise Therefore, when production output increases, average revenue and average profit per equivalent unit will decrease for companies that want to make a profit of 155% of production costs Thus, based on the analysis presented above, we can clearly see how changes in the production output level have an impact on the job order costing system, the process costing system, and the company's revenue Managers must develop and select a strategy that is appropriate for the company's strategy based on this information This is a preview Do you want full access? 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Log in CONCLUSION The study has improved our knowledge of two approaches for calculating cost and how to use them in real-world situations, as well as how to determine product cost While there are numerous parallels between the two approaches, there are also a lot of variances, each with unique benefits and drawbacks If jobbased costing is appropriate for businesses that produce goods in response to orders and that use closed technological processes, then the approach of determining cost by production process is appropriate for businesses that manufacture goods make goods using a variety of processing processes in parallel or continuously, in accordance with technological principles Consequently, the appropriate 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 more clearly illustrated in this report Based on that, it will assist managers in developing smart business plans and strategies to support the company's objectives REFERENCE Prof Nguyen Thi Thu Lien Lecture slides and exercises for Cost Accounting Prof Nguyen Ngoc Quang Management Accounting Hanoi: National Economics University Prof Srikant M Datar and Prof Madhav V Rajan Horngren's Cost Accounting: A Managerial Emphasistar Srikant M Datar Shopee Vietnam daylambanh.edu.vn Group assignment template : VIN-COOKI