Standard Cost for Chocolate Muffins - 12-pack

Step 1: Direct material (DM) costs

Ingredients Standard price
self-raising flour $1/kg
cocoa powder $8/200g
caster sugar $2.50/kg
dark chocolate bits $3.95/200g
vegetable oil $3.30/750ml
milk $2.39/2L
vanilla extract $7/100ml
eggs $3.95/12 pack
Cupcake Container with 12 cavities $10.75/12 pack
Total direct materials

Step 2: Direct labour (DL) costs

Labour type Standard price
Assembly line worker and inspector $22.69/hr (Payscale)
machine operator $25.68/hr (Payscale)
Total direct labour

Step 3: Manufacturing Overhead (MOH) costs Monthly Amount

factory rent $1,000
factory supervisor $4,000
factory insurance $100
factory utilities $200
oven depreciation/straight-line method $200
baking trays depreciation/straight-line method $50
mixing machine depreciation/straight-line method $100
Total overhead $5,650

Total standard unit cost (DM+DL+MOH per unit) $10.220

*Standard price will be based on the manufacturing overhead rate to be determined (we will cover in more detail in wee
I have detremined direct labour hours as the activitry driver for MOH costs.
Labour hours per day for 1 employee 8 hours
Labour hours per week for 1 employee 40 hours
Labour hours per month for 1 employee 160 hours
Labour hours per month for 5 employees (160 hours x 5) 800 hours
Now we can calculate the predetermined MOH rate as follows: $5,650 monthly MOH cost / 800 direct labour hours for the

** The 2 minutes is the direct labour time required for a pack of muffin, as calculated in DL section.
 Fixed Cost Variable Cost Mixed cost
Standard usage Standard cost (rounded) P
495 grams $0.500 P
55 grams $2.20 P
220 grams $0.55 P
165 grams $3.26 P
125 ml $0.55 P
167 ml $0.20 P
4.9ml $0.35 P
2 eggs $0.66 P
1 container $0.90 P
$9.170 P

Fixed Cost Variable Cost Mixed cost

Standard usage Standard cost
1 minute $0.38 P
1 minute $0.43 P
2 minutes $0.81 P

*Standard price **Standard usage Standard cost Fixed Cost Variable Cost
P
P
P

P
P
P
$7.06 per labour hour 2 minutes $0.24

etermined (we will cover in more detail in week 5). $7.06 per labour hour was calculated as follows:

hly MOH cost / 800 direct labour hours for the month = $7.06 per direct labour hour

calculated in DL section.
 The below prices are from Coles

Mixed cost

P
1.
Job-Order Cost Sheet
Job Name: Job 1 Date Started: This week Date Completed: ?
Direct materials ($9.17 + $1) $101.70
Direct labour ($0.81 + $0.19) $10.00
Allocated overhead $2.40
Total cost $114.10
÷ Number of units ÷ 10
cost per pack $11.41

Job-Order Cost Sheet

Job Name: Job 2 Date Started: This week Date Completed: End of this week
Direct materials ($9.17 + $4) $197.55
Direct labour ($0.81 + $0.24) $15.75
Allocated overhead $3.60
Total cost $216.90
÷ Number of units ÷ 15.00
cost per pack $14.46

Job-Order Cost Sheet

Job Name: Job 3 Date Started: This week Date Completed: End of this week
Direct materials ($9.17 + $3) $243.40
Direct labour ($0.81 + $0.24) $21.00
Allocated overhead $4.80
Total cost $269.20
÷ Number of units ÷ 20.00
cost per pack $13.46

Job-Order Cost Sheet

Job Name: Job 4 Date Started: This week Date Completed: ?
Direct materials ($9.17 + $2) $279.25
Direct labour ($0.81 + $0.19) $25.00
Allocated overhead $6.00
Total cost $310.25
÷ Number of units ÷ 25.00
cost per pack $12.41

2.
Under-applied overhead = Actual Overheads - Applied Overheads
Actual overheads = 110% × applied overheads
Applied overheads* = $16.80
Actual Overheads = 1.1 × $16.80 = $18.48
Under-applied overhead = $18.48-$16.80 = $1.68

3.
The ending balance of work in process for the week
Job 1 $114.10
Job 4 $310.25
$424.35

The cost of goods sold for the customised orders this week
Statement of Cost of Goods Sold
Beginning finished goods inventory 0
Cost of goods manufactured $486.10
Goods available for sale $486.10
less: Ending finished goods inventory 0
Normal cost of goods sold $486.10
add: Underallocated overhead $1.68
Adjusted cost of goods sold $487.78
 Support Departments Production Departmen
HR Marketing Mixing
Departmental costs $200,000 $100,000 $800,000
Square metres 50 50 10,000
Number of employees 5 3 30
Machine hours - - 100,000
Labour Hours 2,000 1,500 11,000

1.
Allocation of the support departments overhead costs to the production departments using the step method
Calculate usage or allocation ratios:
Marketing Mixing
HR: [50 ÷ (50 + 10,000 + 5,000 + 3,000)]
1
0.0028 -
[10,000 ÷ (50 + 10,000 + 5,000 + 3,000)] - 0.5540
[5,000 ÷ (50 + 10,000 + 5,000 + 3,000)] - -
[3,000 ÷ (50 + 10,000 + 5,000 + 3,000)] - -

Marketing: [30 ÷ (30 + 12 + 10)]

2
0.5769
[12 ÷ (30 + 12 + 10)] -
[10 ÷ (30 + 12 + 10)] -

Support Departments Production Departments

HR Marketing Mixing
Departmental costs $200,000.00 $100,000.00 $800,000.00
HR1 -$200,000.00 $554.02 $110,803.32
Marketing 2
- $100,554.02 $58,011.93
Total budgeted manufacturing overhead c $0.00 $0.00 $968,815.26
Labour hours 11,000

Predetermined overhead rate

Mixing = Total budgeted manufacturing overhead cost

Labour hours

$968,815.26
11,000
$88.07 per labour hour

Baking = Total budgeted manufacturing overhead cost

Labour hours
 $278,606.44
5,000
$55.72 per labour hour

Packing = Total budgeted manufacturing overhead cost

Labour hours

$132,578.31
4,000
$33.14 per labour hour

2.
Allocation of the support departments overhead costs to the production departments using the direct method
Calculate usage or allocation ratios:
Mixing
HR: [10,000 ÷ (10,000 + 5,000 + 3,000)]
1
0.5556
[5,000 ÷ (10,000 + 5,000 + 3,000)] -
[3,000 ÷ (10,000 + 5,000 + 3,000)] -

Marketing: [30 ÷ (30 + 12 + 10)]

2
0.5769
[12 ÷ (30 + 12 + 10)] -
[10 ÷ (30 + 12 + 10)] -

Support Departments Production Departments

HR Marketing Mixing
Departmental costs $200,000 $100,000 $800,000
HR1 -$200,000 - $111,111
Marketing 2
- -$100,000 $57,692
Total budgeted manufacturing overhead c $0.00 $0.00 $968,803
Labour hours 11,000

Predetermined overhead rate

Mixing = Total budgeted manufacturing overhead cost

Labour hours

968,803
11,000
$88.07 per labour hour

Baking = Total budgeted manufacturing overhead cost

Labour hours

278,632
 5,000
$55.73 per labour hour

Packing = Total budgeted manufacturing overhead cost

Labour hours

132,564
4,000
$33.14 per labour hour
3.
The step method considers some of the interactions among service departments, whereas the direct method ignores thes
 Production Departments
Baking Packing
$200,000 $80,000
5,000 3,000
12 10
200,000 60,000
5,000 4,000

s using the step method

Baking Packing
- -
- -
0.2770 -
- 0.1662

- -
0.2308 -
- 0.1923

Production Departments
Baking Packing
$200,000.00 $80,000.00
$55,401.66 $33,241.00
$23,204.77 $19,337.31
$278,606.44 $132,578.31
5,000 4,000
s using the direct method

Baking Packing
- -
0.2778 -
- 0.1667

- -
0.2308 -
- 0.1923

Production Departments
Baking Packing
$200,000 $80,000
$55,556 $33,333
$23,077 $19,231
$278,632 $132,564
5,000 4,000
eas the direct method ignores these interactions