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Production of Bread - Case Study Example

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The paper "Production of Bread" is a wonderful example of a case study on family and consumer science. Bread is a very vital meal that is used by almost all the human populace in the universe. It is mostly taken with tea and it is a favorite dish that is taken mostly during breakfast. There are many bakeries all over the world that are engaged in the business of making a wide range of bread…
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PRODUCTION OF BREAD {STUDENTS’ NAMES} {DEPARTMENT} 23RD JUNE, 2011 Table of Contents PRODUCTION OF BREAD 1 {STUDENTS’ NAMES} 1 {DEPARTMENT} 1 23RD JUNE, 2011 1 PRODUCTION OF BREAD 3 INTRODUCTION 3 PRODUCTION STAGES 3 RESOURCES REQUIRED 4 COST 5 Subdivision of costs of elements of cost 5 COST OBJECT 7 ALLOCATION OF MANUFACTURING OVERHEADS 10 REFERENCES 14 PRODUCTION OF BREAD INTRODUCTION Bread is a very vital meal that is used by almost all the human populace in the universe. It is mostly taken with tea and it is a favorite dish that is taken mostly during breakfast. There are many bakeries all over the world that are engaged in the business of making a wide range of breads. Bread is known for various names depending on the locality and the language of the people who hail from around that place such as bread, roti, loaf, kaboos etc. it is of many varieties that ranges from cakes to loaves usually cut out to meet the diverse tastes and preferences of the clientele (Steven et al, 2008). PRODUCTION STAGES The main production stages in the manufacture of bread include; I. Preparation of the ingredients- this stages involves determining and measuring the right proportions of the ingredients used in the production of bread II. Dough mixing – preparation procedures are followed up resulting in a dough that is well mixed III. Bulk-fermentation, sponge  time – the dough is left for sometime to allow it to undergo fermentation IV. Dividing or scaling – each unit of the desired make of the bread is measured equal amount of dough V. Rounding VI. Moulding- the dough is modeled into the desired shape VII. Panning VIII. Baking –the dough is put in a baking trough and the baking is done IX. Cooling – the baked bread is given enough time to cool before it is packaged. X. Slicing and the packaging – the bread is sliced and packaged in a nice looking packaging material RESOURCES REQUIRED The main resources needed in the manufacture of bread include; Wheat – main raw material Water Sugar Heat – source of heat is mainly electricity Human labour Machines Other ingredients like margarine, oil and preservatives COST The costs associated with the manufacturing of bread are classified primarily according to the factors upon which they are incurred. These include; a) Material costs:- that is, the costs of raw materials (wheat, water, sugar etc) consumed for the purpose of bread production. b) Labour costs or wages:- that is, the cost of remuneration such as wages, salaries, commission among others of the staff and employees of the baking industry c) Expenses: - that is, the costs of services provided to the bakery and the notional cost to be used of the owned asset of the company (bakery firm), for instance, depreciation on plants and buildings, machinery, land or the building to which the bakery operates from. These costs can further be subdivided into either direct costs or indirect costs, and fixed costs or variable costs Subdivision of costs of elements of cost a) Direct or indirect cost This is the subdivision according to identifiability in the finished bread. Direct costs in material, labor and expenses:-these are costs incurred for and can conveniently be identified to a finished product (bread). They usually form the prime costs Indirect costs in material, labor and expenses: - these are the costs incurred for and cannot conveniently be identified to a finished product (bread). These costs are general and they are incurred for the benefit of a number of cost units or cost centres (Weygandt et al, 2009). b) Fixed or variable costs This is the cost subdivision according to behavior Fixed cost in material, labor and expenses:- these are those costs which remain constant in total when the volume of output changes Variable costs in material, labor and expenses:- these are those costs which changes with the level of production but the variable cost per unit remains constant The total cost, Y is given by “fixed cost” +”variable cost” Where the “total variable cost” = the total number of breads produced * cost of one bread Graphically these costs are represented as It can be clearly seen from the graph that the variable cost is zero (0) if there is no bread that is produced and then varies depending on the units of bread produced. The fixed cost will have to be incurred irrespective of whether the bakery is in operation or not. The following table summarizes all the costs incurred in the production of bread DIRECT COST INDIRECT COST FIXED COST VARIABLE COST Raw materials, packaging materials Insurance, travel expenses, communication, depreciation 10% of Heat and lighting, administration cost, 30% of labour, advertising, office expenses, rent and rates, 70% of labour, 90% of heat and lighting, raw materials, COST OBJECT In the bread production process many costs objects can be identified according to the classification above. These include labor hours, machine hours and units of bread produced which can be comfortably allocated into the production, administration and the marketing department of the bakery. I. Production:- this is the cost of the sequence of operation which begin with supplying the raw materials, labor and services and end with primary slicing and the packaging of the bread. II. Administration:- these includes the costs of the management of the bakery, and of secretarial, accounting and administrative services which cannot be directly related to production of the bread , marketing , and research for development functions of the bakery. Administration expenses are in the nature of indirect expenses and include the following: Salaries of office staff Maintenance of factory estate Rent, rates and depreciation of buildings, office Postage, telephone, and stationary Office supply and expenses General administration expenses III. Marketing: - these are the costs incurred in the researching of the potential market or promoting the bread in suitably attractive forms and generally acceptable and affordable prices. Marketing costs in relation to the manufacture of bread can further be grouped into: a) Selling costs: - this is the cost incurred in securing the orders for the bread which usually include salesmen salaries, commission and travelling expenses. Other examples are the rent of salesroom and offices, training of salesmen and sales staff, cost of preparing tenders for special sale, cost of after sale services among others. b) Publicity costs:- it represents i. Costs incurred in the advertising and promotion of the bread. ii. Costs incurred in advertising and promotion of the factory as a distinct from the bread product or the services to the production of the bread. c) Distribution costs: - costs incurred in the warehousing of saleable bread and delivering bread to the final customers etc. it includes rents, depreciation of warehouses, costs of insurance, export duty, slicing and packaging, shipping, maintenance of transport vans among others. ALLOCATION OF MANUFACTURING OVERHEADS Departments within the bakery are generally divided into two broad classes which are the operating departments and the service departments. The operating departments include those departments or units where the central purpose of the bakery are carried out, for example, the production department such as Preparation of ingredients, Dough mixing, Bulk-fermentation, sponge  time, Dividing or scaling, Rounding, Moulding, Panning, Baking, Cooling, Slicing and the packaging . by contrast, the service departments do not engage directly in the operating activities rather they provide services or the assistance that facilitate the activities of the operating departments, for instance the internal auditing department, the personnel department, marketing department, accounting and finance departments. Although service departments do not engage directly in the operating activities of the bakery, they are generally viewed as being part of the cost of the final bread or service the same way as are the raw materials of the bread like the wheat, water, sugar etc in the bakery. The main allocation bases used in the allocation of the manufacturing overhead of the bread is the labour hours since the bakery is a labor intensive industry and thus it reflects as accurately as possible the benefits that are being received by the various departments within the bakery from the services involved. The bakery uses the direct method in the allocation of common costs or service cost centre costs to production department. This method ignores the service between two service departments and allocates all costs directly to operating departments in the ratio of remaining percentages. The production stages in the bakery are generally classified into four main operating departments namely, Preparation of ingredients, Moulding, baking and Slicing and packaging departments. The main service departments are catering, marketing, accounting and finance service departments (Hilton, 2004). SERVICE DEPARTMENTS OPERATING DEPARMENTS Catering Preparation of ingredients Accounts and finance Moulding Marketing Baking Slicing and packaging For a period the distribution summary has the following total PRODUCTION COST CENTRE $ 000 Preparation of ingredients 1600 Moulding 1400 baking 1000 Slicing and packaging 900 SERVICE COST CENTRE catering 468 marketing 600 accounting and finance 400 TOTAL 6368 The expenses of service cost centre is charged out on percentage basis in the production department as follows Production departments Service departments Preparation of ingredients moulding baking Slicing and packaging catering 20% 30% 20% 30% marketing 15% 40% 20% 25% accounting and finance 35% 20% 25% 40% In the bakery there are period costs shown separately from product costs. Product costs are the costs associated with the bread production or the services offered within the bakery whereas the period costs are not directly related to the to the production of bread, service or the asset that are charged as expenses to the income statement in the period in which they are incurred in the bakery. These costs are shown in the table below Period costs Product costs Insurance, catering, Hospitalization, leisure and outings, training of the staffs and employees Selling, Travelling, rent and rates, salaries and wages, heat and lighting, depreciation of plant and machinery, advertising, office expenses, cost of raw materials and labor Bread belongs to the “job order costing system” as various products are prepared each period. For instance, the bakery typically produces various types of bread comprising of cakes to block loaves which are all meant to be consumed by different target customers ranging from children to adults. In this case, therefore, the costs are purely marked out to the specific jobs thereafter the costs related to the job is then divisible by the total number of units that are used in the job which results to the mean (average) cost for each unit produced. REFERENCES Hilton, R. W. (2004) Managerial Accounting: creating value in a dynamic business environment. New Delhi: McGraw-Hill Publisher. Steven R. J., Roby B. S., and Gregory, J. (2008). Managerial Accounting: A Focus on Ethical Decision Making. New Jersey: Cengage Learning. Weygandt, J. et al. (2009) Managerial Accounting: Tools for Business Decision Making. New York: John Wiley and Sons. Read More
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