Managerial Accounting -Residency

Managerial Accounting -Residency


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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.


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


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


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


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


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


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


Gimme Cake, LLC Select Financial Date – May 2020 Currently **Managing Labor Costs – 20% of sales **Targeting 17% gross margin


Other Data


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


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


Cost Data, continued

Cost Category (Behavior) May 2020


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


Cost Data, continued

Cost Category (Behavior) May 2020


Co-owners’ Salary (Fixed) $25,300

Brokers’ Commission (Variable) $30,667



Income Tax $22,280



Your Team Assignment #1


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.

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