Royal Biscuits

 

1. Calculate the standard cost of 1 kg of Supreme crisps, Tropical chocolates and Sublime rolls, with the full costing method, using practical capacity as a denominator. This will allow William Kensington to review its selling prices. We need to design a table to calculate the standard costs. This will be the easiest way to organize the information for the problem and necessary calculations.

Cos ostt pe perr kg kg..  

Chocolate Butter Sugar Flower Other Total

Su Supr prem emee Cri rissps Quantit y Cost

8 200g 4 150g 1 250g 0.35 250g 1.5 1 15 50g

1.6 200g 0.6 250g 0.25 150g 0.0875 250g 0.225 15 1 50g 2.7625

14.85

 

Su Supr prem emee Cri risp sp

Labor Costs

Worker info. Maintainence Worker info. Labor in hours Direct Costs

Machine Hours Depreciation expense Power expense   Admin. Costs General admin. Rent Management costs Distribution Selling   Actual Costs Actual Costs per kg. Standard Cost

Tropical Chocolate Rolls Quantit y Cost

1750 total hours 25 per hour 175000 (1750 x 25 x 4) 19 per hour 33250 (1750 x 19)

1.6 1 0.15 0.0875 0.225 3.0625

Trop Tropiical cal Cho hoco cola late tess

Sublime Rolls Quantit y Cost

50 250 200 250 250

0.4 1 0.2 0.0875 0.375 2.0625

Su Subl blim imee Ro Roll llss

68292.68

51219.51

55487.81

12975.6

9731.7

10 10542.7

0.09

0.08

0.12

0.16

0.12

0.13

 

134000 3

16300 30000 48760 18450 7800

5 52 2292.69 2048.76

2

39219.51 1024.38

2.5

42487.8 1387.17

5058.62 .62 9 93 310.34 15132.41 5725.8 .86 6 2420.69

4496.55 8275.86 13451.03 5089.65 2151.72

6744.83 12 1 2413.8 20176.56 7634.49 3227.59

173260.4

134662.9 .97 73

160104.8

10.8 15

9.6 17

13.2 18

 

Variance

4.2

7.4

4.8

2. At the end of the year, it becomes clear that the purchase price of chocolate increased to $8,65 per kg. A marketing study performed by an outstanding marketing office revealed that in order to increase sales, the flavor of the Supreme crisps should be adapted. Therefore, the recipe of Supreme crisps was changed. Royal Biscuits Inc. needed to purchase 150g of chocolate and 200g of butter to  produce 1kg of the new Supreme crisps. In addition the production workers workers hourly cost increased increased from $25 to $26,5. Calculate the actual costs per Kg of the 3 products, using the full costing method. The actual sales volume consists of 22,500Kg of Supreme crisps, 16,300kg of Tropical chocolates and 20.880Kg of Sublime rolls. Another table is necessary for this step, also. We can modify our table to reflect the current changes that have taken place. Actu Ac tual al Co Cost st  

Chocolate Butter Sugar Flower Other Total Cost

8.65 150g 4 200g 1 250g 0.35 250g 1.5 1 15 50g

Worker info.

Su Supr prem emee Cri risp spss

Quantity

Cost

1.6 1 0.15 0.0875 0.225 3.0625

Tr Tro opi pica call Cho Chocol colates tes

Su Subl blim imee Ro Roll llss Quantit y Cost

50 250 200 250 250

0. 4 1 0. 2 0.0875 0.375 2.0625

Su Subl blim imee Roll Rollss

1750 26.5 per hour =185500 (1750 x 26.5 x 4) 19 per hour

Maintainence Labor hours

33250 (1750 x 19)

Direct Costs

 

Machine Hours Depreciation expense Power expense   Administrative costs General administration exp. Rent Management costs

Trop Tropic ical al Choc Chocol olat ates es

1.2975 200g 0.8 250g 0.25 150g 0.0875 250g 0.225 1 15 50g 2.66

 15.5

  Labor

Su Supr prem emee cr cris isps ps Quantit y Cost

72390.24

54292.68

58817.08

12975.6

9731.7

10542.7

0.09

0.08

0.12

0.16

0.12

0.13

134000 3

52292.69 2048.76

2

39219.51 1024.38

2.5

42487.8 1387.17

  16300 30000 48760

5058.62 9 93 310.34 15132.41

4496.55 8275.86 13451.03

6744.83 1 12 2413.8 20176.56

 

Distribution Selling Total for production Actua Ac tuall co cost stss

18450 7800

Sales totals

5725.86 2420.69 177355.2 10.5 10.54 4 22500 Kg

5089.65 2151.72 137733.08 11.5 11.5 16300 Kg

7634.4 .49 9 3227.59 163432 9.9 20880 Kg  

3. Compare actual and standards. Calculate and analyze the following variances: a- Direct Direct materials materials variance, variance, direct direct labor labor variance variance and manufacturi manufacturing ng overhead overhead variance. variance.  b- Supreme crisp variance, Tropical Tropical chocolates variance variance and Sublime roll variance( th these ese variances only include the direct costs)

A) Direct materials   15.5 – 14.85 = $0.65 Direct labor 185500 – 175000 = $10500 Manufacturing overhead There would not be a difference from actual to standard cost. B) Supreme Crisps 15 – 10 = $4.46 Tropical Chocolates 17 – 11.5 = $5.5 Sublime Rolls 18 – 9.9 = $8.1  

 

4. Royal Biscuits Inc. sells it Supreme crisps at $13,2/kg, its Tropical chocolates at $14,8/Kg and its Sublime rolls at $11,5/kg. Given the actual sales volume, how will the income statement look like using. a- Standard Standard full costing costing at practical practical capacity capacity ?  b- Actual costing ? To simplify, we can construct another small table. Tables are the perfect way to organize and analyze information for problems involving variances, and are generally the selected choice for graduate students and professors. Here is our next table:

Supreme Crisps

Tropical Chocolates

Sublime Rolls

 13.2

14.8

11.5

15

17

18

B) Actual Cost

10.54

11.5

9.9

Profitcalculated at selling price less actual costs.

2.66

3.3

1.6

  Price A) Standard Cost