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.

Tropical Chocolate
  Cost per kg. Supreme Crisps Rolls Sublime Rolls
Quantit Quantit Quantit
    y Cost y Cost y Cost
Chocolate 8 200g 1.6 200g 1.6 50 0.4
Butter 4 150g 0.6 250g 1 250 1
Sugar 1 250g 0.25 150g 0.15 200 0.2
Flower 0.35 250g 0.0875 250g 0.0875 250 0.0875
Other 1.5 150g 0.225 150g 0.225 250 0.375
Total  14.85   2.7625   3.0625   2.0625

    Supreme Crisp Tropical Chocolates Sublime Rolls

Labor Costs 1750 total hours      
25 per hour
175000 (1750 x
Worker info. 25 x 4)   68292.68   51219.51   55487.81
19 per hour
Maintainence 33250 (1750 x
Worker info. 19)   12975.6   9731.7   10542.7
Labor in hours   0.09   0.08   0.12  
             
 Direct Costs              
Machine Hours   0.16   0.12   0.13  
Depreciation
expense 134000   52292.69   39219.51   42487.8
Power expense   3 2048.76 2 1024.38 2.5 1387.17
               
Admin. Costs              
General admin. 16300   5058.62   4496.55   6744.83
Rent 30000   9310.34   8275.86   12413.8
Management costs 48760   15132.41   13451.03   20176.56
Distribution 18450   5725.86   5089.65   7634.49
Selling 7800   2420.69   2151.72   3227.59
               
Actual Costs     173260.4   134662.973   160104.8
Actual Costs per
kg.     10.8   9.6   13.2
Standard Cost     15   17   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 hourly cost 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.

  Actual Cost Supreme crisps Tropical Chocolates Sublime Rolls

Quantit Quantit
    y Cost Quantity Cost y Cost
Chocolate 8.65 150g 1.2975 200g 1.6 50 0.4
Butter 4 200g 0.8 250g 1 250 1
Sugar 1 250g 0.25 150g 0.15 200 0.2
Flower 0.35 250g 0.0875 250g 0.0875 250 0.0875
Other 1.5 150g 0.225 150g 0.225 250 0.375
Total Cost  15.5   2.66   3.0625   2.0625
    Supreme Crisps Tropical Chocolates Sublime Rolls
Labor 1750      
26.5 per hour
=185500 (1750
Worker info. x 26.5 x 4)   72390.24   54292.68   58817.08
19 per hour
33250 (1750 x
Maintainence 19)   12975.6   9731.7   10542.7
Labor hours   0.09   0.08   0.12  
               
Direct Costs              
Machine Hours   0.16   0.12   0.13  
Depreciation expense 134000   52292.69   39219.51   42487.8
Power expense   3 2048.76 2 1024.38 2.5 1387.17
               
Administrative costs              
General
administration exp. 16300   5058.62   4496.55   6744.83
Rent 30000   9310.34   8275.86   12413.8
Management costs 48760   15132.41   13451.03   20176.56
Distribution 18450   5725.86   5089.65   7634.49
Selling 7800   2420.69   2151.72   3227.59
Total for production     177355.2   137733.08   163432
Actual costs     10.54   11.5   9.9
22500 20880
Sales totals   Kg   16300 Kg   Kg  

3. Compare actual and standards. Calculate and analyze the following variances:

a- Direct materials variance, direct labor variance and manufacturing overhead variance.

b- Supreme crisp variance, Tropical chocolates variance and Sublime roll variance( these
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 full costing at practical 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 Tropical Sublime

  Crisps Chocolates Rolls
Price 13.2 14.8 11.5
       
A) Standard
Cost 15 17 18
       
B) Actual Cost 10.54 11.5 9.9
       
Profit-
calculated at
selling price less
actual costs. 2.66 3.3 1.6