Due in 18 hours - 1 page - use ATTACHED paper for business scenario gv

Cost of Flow in an Organization

Institution Affiliation

Name of Student

Instructor’s Name

Division Manager of AMMIGHETTI’S BAKERY

Ammighetti’s Bakery is a company that produces baked products such as bread, several varieties of cakes, soft drinks and quick coffee. This company was founded way back in 1921. It was founded by Sole Proprietor Louis Amighetti who by then was an Italian Immigrant. Since then there has been expeditious development and growth of this company in business, geographical space and in number of employees globally. I am a manager in this company in charge of marketing. I ensure that all our targeted customers receive information about us and what we offer; differently from our close competitors.

Since Amighetti produces different types of bakery products, there has to be different receipts in each case. Therefore, the production process has to be scheduled and budgeted for as separate entities. Even though the final budget will be subjected as one single cost of production, the segmentation aids in identifying what kind of production requires a specific amount of cash. For this reason, Amighetti has always used process costing method. The main advantage of this method is that there has been ease of direct follow up of the expenditures used on input process. Besides, since the demand of potential customers vary with seasons, this method of costing is best since it allows the budget to vary effectively depending on the demand and ultimately the capacity of the production process.

The manufacturing cost of Amighetti usually vary for every product it produces, the cost flows differ and vary greatly. Production is done daily since the products are fast meals and are highly perishable. The subsequent budgets are budgeted for earlier in the previous day and this is done this way to keep customers orders and important ceremonies supplied in time. Below is an example of the cost of production of bread of a specified capacity. This is basically a day’s budget. Within is cost of direct labour and material used.

S.No.	Items	Quantity	Average/unit ($)	Total Cost
1.	Direct Materials:
	Maida	55Kg	18/Kg	$990.00
	Sugar	1.4Kg	0.88/gram	$1,432.00
	Salt	0.9Kg	0.15/gram	$135.00
	Shortening Agent	0.4Kg	0.10/gram	$160.00
	Water	33 Litres	$0.4/litre	$82.5
2.	Direct Labour	8 hour/day	$2.5/hour	$20.00
3.	Manufacturing Overhead:
	Power/Fuel	Weekly	$11/day	$77.00
	Wrapping material	4 boxes	$103.4/box	$413.60
	Labels	25 metres	$12/metre	$300.00
	TOTAL COST	N/A	N/A	$3,610.10

A predetermined overhead cost is the most appropriate method of allocating manufacturing overhead. This involves predetermine cost of the manufacturing overhead using known rates of cost expenditures. For instance rate of labour cost per hour can be use to determine the cost of labour in a day for the number of hours worked. This is similar with other rates of direct inclusion as a requirement of to facilitate the manufacturing process that is involved. Different allocation methods would affect my division by providing either exceedingly high or low budget for subsequent production process that might lead to excess production if the budget is exceeded or low production if the budget is lower than expected. Both of this may lead to surplus production and deficit production respectively. Each of these have segregated consiquences.

References

Fenies, P., Lagrange, S., & Tchernev, N. (2010). A decisional modelling for supply chain management in franchised networks: application in franchise bakery networks. Production Planning & Control, 21(6), 595-608.

Madiya, A. T. (2006). Evaluation of the cost-effectiveness of dried bakery products as feed for small-scale broiler production (Doctoral dissertation).