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This assignment undertakes a comparative analysis between the job-costingapproach and the process-costing method in identifying the cost involved inmanufacturing 1000 units of crinkles.

For job order costing, extensive research has been conducted to determine the costof the principal ingredients required to produce crinkles, namely butter, sugar,vanilla, flour, and chocolate chips Based on the findings of this investigation,precise calculations have been performed to determine the exact quantity of eachingredient required to manufacture 1000 units of crinkles Therefore, we calculatedthe overall expenses incurred for the procurement of direct materials, payment ofdirect labor, and allocation of manufacturing overhead costs Subsequently, thecost per unit was determined by aggregating all the costs indicated and dividing thesum by the number of products, which was 1000.

For process-costing, we conducted a thorough evaluation of the cost per 1000crinkles within the mixing department, considering our factory's productioncapacity of 5000 units per batch The cost analysis of direct material andconversion, which is currently 40% complete, was undertaken Subsequently, themethod was utilized to compute the per-unit cost.

The concluding segment of our study involves a comparative analysis In thisstudy, we conducted a comparative examination of the unit costs associated withtwo distinct methods Simultaneously, we performed an in-depth analysis ofdiscernible dissimilarities between the two methods, while offering to elucidateaccounts concerning such discrepancies Additionally, we incorporated illustrativeinstances of variances that may manifest during the production process.

Short overview of company:

Cutie Pies is a recently established bakery, categorized as a unicorn startup, with aspecialized focus on producing crinkles, while concurrently allowing clientele toexercise creativity in the customization of their desired cookies The event occurredin the year 2021, after the pandemic, during which a trio of proprietors voyagedthroughout the continent of Europe, partaking in its incomparable culinaryofferings During this instance, the trio came across an exquisite treat known as"crinkles" This delectable confection is based on meringue and comprises a blendof egg whites, icing sugar, granulated sugar, almond meal, and food coloring Fromthat moment onward, the individuals returned to their place of residence with a firmresolve to emulate the desired taste, while simultaneously infusing their own uniquetwist into the crinkles to better suit the Vietnamese palate, all the while maintainingthe refined essence of the confection Social media platforms such as Facebook,TikTok, and Instagram, among others, have been instrumental in generating aplethora of affirmative feedback and assessments from our valued clientele Theprofitability of our business experienced a significant surge, propelling it towardsheightened recognition as one of the foremost bakeries in Ha Long city, centre ofQuang Ninh province This accomplishment has undeniably served to inducewidespread satisfaction among our customers and fostered a positive impact on thecommunity The expansion of our activities is intended to increase the access ofindividuals to our cookies, thereby disseminating our appreciation to a wideraudience comprising those with a propensity for sweetened food items.

Part 1: Establish Cookie Business

Business name: Delicious cookiesLocation: hanoi

Type of cookies: ChocolateCrinkles

Mission statement: Our goal is to deliver impeccable crinkles to ourcustomers, especially generation Y Moreover, clients have a chance to self-create their crinkles with the size, flavor, color and add-ins of their choice.

Part 2: Costing and Sales Information

Costing and Sales Information, Production of 1,000 crinkles

The table above represents the costs creating 1000 crinkles using the job ordercosting method.

 We choose butter, sugar, vanilla, flour and chocolate chips as our 5 mainingredients, which its price has mentioned in the next right column Since ourpoint is to create incredible cakes, provide the best customer experiences, thetotal cost for these fine materials to produce 1000 crinkles are imported at thecost up to 276$ (including $85 for butter, $25 for sugar, $6 for vanilla, $100for flour and $60 for chips ).

 After researching and analyzing the general labor market, we decided to use2 employees, working 8 hours per day and spend 2 days finishing this job.We figured the reasonable cost to make 1000 crinkles would be 15$ per hourper employee, so the total cost for labor is calculated to be 480$.

 The cost for MOH would be 144$ because the manufacturing overhead rateis 30% of direct labor costs.

 Overall, the total cost for direct materials, direct labor and MOH isdetermined to be 900$, and the cost per unit for our crinkles is 0.9$.

 We decided the selling price for each of these crinkles to be 1.8$ to make atleast 100% profit of the cost, and this price is also reasonable, compared tothe crinkles’s price of others businesses.

This table above report the costs in the Mixing department in producing 1000crinkles using the process costing method.

 Since the clients we aim towards are more common, the ingredients for thesebatches of crinkles are not as expensive, total cost for the 5 main ingredientsis only around 100$ to make 1000 crinkles.

 The crinkles are in the Mixing department for 8 hours, and the costdetermined for 2 employees is 4$/employee/hour (since this method is nottoo demanding on the employee’s skill) Which resulted in the total laborcost of 64$ for this department.

 Because this method relies more on machines, the manufacturing overheadcost is very high We determined the total overhead cost to complete the1000 crinkles is up to 800$, and in this department with 40% complete thecost of overhead in the mixing department is 320$.

 The total cost per equivalent unit for the crinkles in the Mixing departmentresults in a few 1.06$, which is more than the job costing method while usingcheaper ingredients And the predetermined cost when fully completed iseven higher with 100$ materials, 240$ labor cost and 800$ overhead,meaning the cost of 1.14$ per crinkles.

The main reason for this is because the process costing system is best used for massproduction, and since our machine has the capacity to make 5000 crinkles at a time,the production of only 1000 crinkles is a waste and push the cost per equivalentunit up high, meaning less profit for the intended selling price of 1.2$ So, it ismore reasonable to produce at least 5000 crinkles as the overhead cost would staythe same and lessen the cost per unit.

Part 3: Compare and Contrast Costing Methods

As previously stated, the cost per unit for job order costing is $0.9, and the cost perequivalent unit for process costing is $1.06 The pricing discrepancies betweenthese two strategies are explained by two key factors.

First off, it is clear that the amount in the spreadsheet does not accurately reflect allof the process's ultimate costs because the mixing department only performs theprocess costing by 40%, or less than half When crinkles are finished, they are sentto the Add-ins and Packaging section Following that, the price of these crinkleswill fluctuate somewhat Our board, however, anticipated that the cost between

work order and process costing will continue to diverge The major distinctionbetween process and task costing is the amount of averaging utilized to calculateunit prices Individual tasks employ varying quantities of resources, thus pricingeach work at the same average production cost is inaccurate Contrarily, processcosting determines an average production cost for all units produced when equal orcomparable pieces of goods or services are mass-produced.

Furthermore, as previously explained, our crinkle-making equipment has thecapability to produce up to 5,000 cakes simultaneously Manufacturing only 1,000crinkles would increase the cost per unit significantly However, with the samemanufacturing overhead cost, our equipment can produce 5,000 crinkles, reducingthe cost per unit to just $0.50 [(100x5+240x5+800)/5000] Job order cost systemsare typically more expensive to maintain than process costing systems since there isa cost involved in allocating specific materials and labor to the product A job ordercost system is suitable for custom jobs where it is easy to determine the cost ofmaterials and labor for each job A process cost approach is more appropriate forproducing identical products using a standardized process It is often less expensiveto maintain and challenging to trace direct material, direct labor, and manufacturingoverhead to a specific unit While the actual cost to produce each unit through aprocess costing system may vary, the average result is an adequate determination ofthe cost per unit On the other hand, a job order cost system produces items in smallquantities and includes unique operations such as product manufacturing However,as previously mentioned, if there is a demand for up to 5,000 crinkles, the price willchange, and process costing will provide a more accurate cost per unit Therefore,the job order costing method gives us a comprehensive view of all the costs of ourproducts, taking into account the two major reasons previously mentioned.

In both costing methods, we will now discuss product costs and conversion costs.According to the task order costing system, product costs comprise material, labor,and overhead costs, which may be evaluated differently Accurately determiningthe cost per unit is critical for job order costing since it enables companies to set anappropriate sales price for their products At our company, we have calculated the

cost per unit for crinkles to be $0.9, which will help us determine the selling priceand maximize our profits.

In contrast, when dealing with process costing, conversion costs play a vital role.The manufacturing process for process costing is largely automated, whichsignificantly reduces direct labor costs to a negligible $64 compared to $480 in joborder costing This leads us to group the costs of direct labor and MOH into asingle product cost known as Conversion.

After careful consideration, our board has concluded that Cutie Pies will utilize joborder costing to create batches of 1000 overall for the reasons mentioned above.However, to boost demand for our pastries, we are optimistic that we can scale upand find a more substantial market in the future If orders for crinkles aimedtowards more general customers reach 5000 or more, we will consider processcosting This is because in this scenario, MOH, including plant insurance, utilities,and equipment depreciation, will be allocated to a more significant number ofcrinkles produced, reducing the cost per unit for overhead Nevertheless, we stillview job order costing as crucial to our business for producing crinkles with thehighest quality.

Part 4: Impact of Increase and Decrease in Costs, and Sales

For the job order costing method that our company use, the cost per unit does notchange whether the number of crinkles produced increases or decreases; therefore,the profit per crinkles does not change The only change will be the increase ordecrease in revenue if 500 or 1500 crinkles are produced If 500 crinkles are sold,the revenue will be 900$ and the number for 1500 crinkles will be 2700$ while theprofit per crinkles for the 2 cases is still the same at 0.9$.

However, the cost and profit per crinkle change drastically as the number producedincreases massively As explained above in part 2, our machine has the capacity tomake 5000 crinkles at a time So, if a batch of 5000 is made instead of 1000crinkles, the overhead cost would remain the same, and to our calculation, the total

cost of materials, labor, and overhead for 5000 crinkles would be 500$, 1200$, and800$, respectively Meaning the cost per unit is lowered to 0.5$ per crinkle (muchcheaper compared to 1.14$ making 1000 crinkles) And since the predeterminedselling price is 1.2$ per crinkle, the profit is increased to 0.7$ instead of 0.06$.Therefore, much more profit is made on each crinkle sold.

Conclusions and Recommendations

Upon completion of our calculations to produce 1000 crinkles using both costing and process-costing methods, it has been determined that the unit cost forthe former is $0.9, whereas the cost per equivalent unit for the latter is $1.06.Hence, employing job orders costing for the quantity of 1000 appears to be asensible approach aimed at optimizing profitability Despite an increase in thedemand for more general crinkles, our company has taken the stance of continuingto utilize process costing The reasoning behind this decision is rooted in thecapacity of our machine, which allows to produce 5000 products at once Thiscapability is instrumental in reducing the MOH cost per unit, thereby resulting in anideal cost per unit The job-costing method is aimed at the high-end consumergroup, characterized by their relatively lower consumption rates, as compared tothe millennials, who represent the target group for the process-costing method.

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