Managerial Accounting -Residency
Managerial Accounting -Residency
1
Gimme Cake, LLC
Your team was recently hired as cost accountants for Gimme Cake, LLC. The brainchild efforts of two high school best friend.
NOW.. Their success relies heavy on your team.
2
Gimme Cake, LLC
Applied for Small business loan
Secured 60,000 sq. ft. facility
Revenue – $6.1M
Projected $9.3M – new major customer
Gimme Cake, LLC – Employees & Plant
8 salaried employees + 50 hourly@ $8.50 – $12.50 per hour; based on 40 hours work week.
3 – 4 warehouse workers – 2 shifts/day; 1 supervisor/shift
Plant capacity=$1M/month; with $500K investments in ovens, mixers, etc. can inc. to $1.5M/month
60% of annual volume = Oct to Dec – Overtime and weekends
4
Gimme Cake, LLC 3 Product Line
Singles – served ready to eat
9 inch cake – pre-sliced sold to distributors/food service/stores
10 inch cake – custom labels, plastic domes – can be full cake, duo pack or variety of flavors
5
Gimme Cake, LLC Production Detail
Four-step process – Mixing, filling, baking, processing
Five cake sheets mixed in large batches
Fillings produced in smaller batches, based on schedule
Sheets filled, placed on trays for baking (15-20 at a time)
Cooling, decorating, slicing, packaging, labeling, frozen
Approx. 1 week per order – just in time; goal 1 cake/5 seconds
6
Gimme Cake, LLC Production Line
Three production lines – little difference in flavors/ingredients
Process varies primarily on packaging
Variety packs – labor intensive
Boxes, plastic containers, package tops, labels
Label designs customer provided – vary by order
7
Gimme Cake, LLC Labor Report
Projected # of workers, hours per day, workdays per month * hourly rate
+ Salaried production workers pay
+ Payroll added costs (taxes, FICA, etc.) ________________________________________________
Total Labor Dollars / Projected Sales = Projected Labor %
***Current target projected labor @ 20% of sales
8
Gimme Cake, LLC Overhead Allocation
Currently allocate the same amount of overhead to every output unit
However, owners believe labor and OH vary greatly by product
Since no there is no tracking of labor hours by product, hence the company has no idea of profitability per product line or labor cost
9
Gimme Cake, LLC Select Financial Date – May 2020 Currently **Managing Labor Costs – 20% of sales **Targeting 17% gross margin
10
Other Data
11
Unit Volume = 64,500
Average Operating Assets = $5,500,000
Minimum Rate of Return = 8%
Cost Data
Cost Category (Behavior) May 2020
Sales $766,667
Expenses:
Raw materials (Variable) $327,934
Bakery Labor (Mixed) $158.767
Admin Salaries (Fixed) $41,367
Supplies (Variable) $3,833
Freight/Ship-In (Variable) $4,907
Freight/Ship-Out (Variable) $64,707
12
Cost Data, continued
Cost Category (Behavior) May 2020
Expenses:
Utilities-Electricity (Variable) $9,813
Utilities-Gas(Ovens) (Variable) $3,067
Water (Variable) $920
Repairs & Maintenance (Fixed) $4,293
Rent Expense (Fixed) $19,167
Telephone & Internet (Fixed) $2,300
13
Cost Data, continued
Cost Category (Behavior) May 2020
Expenses:
Co-owners’ Salary (Fixed) $25,300
Brokers’ Commission (Variable) $30,667
TOTAL EXPENSES $697,042
OPERATING PROFIT $69,625
Income Tax $22,280
NET OPRTG INCOME $47,345
14
Your Team Assignment #1
15
What information does Gimme Cake, LLC need? Before recommending a cost system, it is helpful to understand a company’s information needs. Based on the case information, discuss the types of cost information Gimme Cake product costing system should be able to provide.
