Job Order and Process costing for a Cookie Business

Jill Homely CookyZ
Student Name
Institution
ACC 5301 Management Applications of Accounting
Instructor
Date
Abstract
The current paper focuses on the job order costing and process costing methods to assess the operational, financial health of Jill-Homely CookyZ. Jill-Homely CookyZ is a bakery SME located in Mott Haven and specializes in baking and selling a cookie recipe borrowed from a Malawian Cookie called mbatata. A key aspect of the recipe is the reliance on sweet potatoes. The paper looks at the two costing methods and their implications to the organization when sales increase or decrease. The current paper utilizes job order costing and process costing methods to analyze and determine the cost of a unit cookie and the implications incurred when sales change. A key outcome of the costing process is the total cost of production of a single unit of cookie and the determination of the price customers will pay. The price is, therefore, shaped by the costing outcomes besides expected profit margins on each cookie.
Jill-Homely CookyZ
Introduction
Astute business management requires a detailed understanding of the specific elements that go into the production process. The cost of each element has an impact on the overall cost of the final product. In baking cookies, for instance, the cost of each ingredient impacts the cost of a unit cookie. Further, each stage of the production cycle requires a different amount of labor which also shapes the cost of a unit cookie. Thus, the current paper explores how the two costing methods shape the price of a cookie unit.
The Cookie Business
On a chilly morning in January 2017, Jill, a 12-year old daughter to a single mother, set up cookies stand on an isolated street in Mott Haven. Her mission was to raise funds to assist her family with her , mother's medical and burial costs. Her mother, Homely, had passed on early in January from breast cancer. Jill-Homely CookyZ, as she later called them, was a family recipe that Jill picked from her late grandmother. The recipe is borrowed from mbatata; a Malawian Sweet Potatoes Cookie. Today, Jill-Homely CookyZ (JHC) is an established small business in Mott Haven specializing in the Jill-Homely family recipe. JHC's mission is to inspire empathy in an apathetic society through cookies.
Costing and Sales Information
Job order costing is a costing method used to estimate the cost of manufacturing or producing a product. It consists of direct materials, direct labor, and manufacturing overhead. In the current analysis, the provided estimates produce 1,000 cookies. In terms of direct material (see Appendix 1), the key ingredients include sweet potatoes ($6), unbleached all-purpose flour ($1.6), mild-flavored butter ($0.96), raisins ($3.50), and cinnamon ($3.00). These prices are adjusted based on the quantity of each ingredient required in the production of 1,000 cookies. Therefore, the cost of direct material in the production of 1,000 cookies is $194.46. In terms of labor, JHC has two employees working for six hours a day at a rate of $11.50 per hour (Salary, 2021). It takes two days to produce 1,000 cookies, implying, 24 hours of labor cost $138.00. The manufacturing overhead is 30% of the total direct labor costs ($41.40)...