Operation Costing for Tasty Bread Manufacturing

by | Apr 1, 2024 | Accounting

 

Tasty Bread makes and supplies bread throughout the state of Kansas. Three types of bread are produced: loaves, rolls, and buns. Seven operations describe the production process.
a. Mixing: Flour, milk, yeast, salt, butter, and so on, are mixed in a large vat.
b. Shaping: A conveyor belt transfers the dough to a machine that weighs it and shapes it into loaves, rolls, or buns, depending on the type being produced.
c. Rising: The individually shaped dough is allowed to sit and rise.
d. Baking: The dough is moved to a 100-foot-long funnel oven. (The dough enters the oven on racks and spends 20 minutes moving slowly through the oven.)
e. Cooling: The bread is removed from the oven and allowed to cool. 1
f. Slicing: For loaves and buns (hamburger and hot dog). the bread is sliced.
g. Packaging: The bread Is wrapped (packaged).
Tasty produces its products in batches. The size of the batch depends on the individual orders that must be filled (orders come from retail grocers throughout the state). Usually, as soon as one batch is mixed, a second batch begins the mixing operation.
Directions
Assume that operation costing is the best approach for this bread manufacturer. Describe in detail how you would use operation costing. Use a batch of dinner rolls (consisting of 1.000 packages of 12 rolls) and a batch of whole wheat loaves (consisting of 5.000, 24-oz. sliced loaves) as examples.

Sample Answer

Sample Answer

 

Operation Costing for Tasty Bread Manufacturing

In the realm of operation costing, businesses like Tasty Bread can efficiently allocate costs to specific operations within the production process. This method allows for a thorough understanding of the costs associated with each step, enabling better decision-making and cost control. Let’s delve into how Tasty Bread can employ operation costing using two examples: a batch of dinner rolls and a batch of whole wheat loaves.

Batch of Dinner Rolls

1. Mixing Operation:

– Calculate the cost of ingredients such as flour, milk, yeast, and butter used in the batch of dinner rolls.
– Include the cost of labor and overhead for the mixing process.

2. Shaping Operation:

– Account for the labor and equipment costs involved in shaping the rolls.
– Factor in any overhead costs specific to this operation.

3. Rising Operation:

– Consider the time and resources required for the dough to rise.
– Allocate relevant costs to this phase, including utilities and labor.

4. Baking Operation:

– Determine the cost of baking the dinner rolls in the 100-foot-long funnel oven.
– Include energy costs, labor, and depreciation of the oven.

5. Cooling, Slicing, and Packaging Operations:

– Factor in the expenses associated with cooling the rolls, slicing them, and packaging them into individual packages.
– Include labor, packaging materials, and any other relevant costs.

Batch of Whole Wheat Loaves

1. Mixing Operation:

– Calculate the cost of ingredients for the whole wheat loaves batch.
– Include labor and overhead costs for mixing.

2. Shaping Operation:

– Account for labor and equipment costs related to shaping the loaves.
– Include any specific overhead costs for this operation.

3. Rising, Baking, Cooling, Slicing, and Packaging Operations:

– Follow similar steps as outlined for dinner rolls, but adjust the quantities and costs based on the characteristics of whole wheat loaves.

By meticulously tracking and allocating costs to each operation, Tasty Bread can ascertain the true cost of producing dinner rolls and whole wheat loaves. This detailed cost information enables management to make informed decisions regarding pricing, production volume, and process improvements. Operation costing ensures that resources are utilized efficiently and that the business remains competitive in the market while maintaining profitability.

 

 

 

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