Unit VII

0

Robert Benders

Unit III Assignment

Professor Steve Horan

Columbia Southern University

ACC-5301

10/20/2025

1

The Cookie Haven Company

Introduction

Entrepreneurship business ventures can be started with a rather simple idea, which is a

natural combination of passion and market opportunity. This is a project based on the launching

of a small-scale cookie business under the context of managerial accounting. This aims to know

how cost-accounting systems, namely job order and process costing, can be used to support

strategic decisions made by the business. This paper illustrates how managers use accounting

data to assess profitability, efficiency and sustainability of a single product cookie company by

generating and analyzing production, costing and pricing data of this company.

Part 1: Cookie Business Startup.

Business Name and Location:

The corporation will be called Cookie Haven Company and it will be situated within the

city of Savannah, Georgia, which is characterized by tourism and a high level of hospitality in

the south that will point to the steady flow of visitors.

Mission Statement:

To make new handmade cookies with quality ingredients and care of an artisan to provide

our customers with comfort and pleasure in every bite.

Type of Cookie:

The cookies that Cookie Haven will focus on are Sea Salt Chocolate Chip Cookies that

will consist of locally sourced chocolate and butter and light sprinkling of sea salt. The company

has one specialty cookie to sell which will enable it to stay consistent in quality and accurately

manage its cost preservation.

2

Part 2: Sales Information and Costing.

Job Order Costing

The job order system is characterized by the treatment of each batch (1,000 cookies) as a

special production job. The accumulated costs are direct materials, combined direct labor and

manufacturing overhead (30 percent applied manufacturing overhead).

Direct Materials (per 1,000 cookies) Estimated Cost (USD)

Flour – 15 lbs @ $0.80/lb $12.00

Sugar – 10 lbs @ $1.00/lb $10.00

Butter – 15 lbs @ $4.00/lb $60.00

Chocolate Chips – 10 lbs @ $3.50/lb $35.00

Sea Salt & Vanilla – combined $5.00

Total Direct Materials $122.00

Direct Labor:

Two bakers each earn $15/hour. For two days (16 total labor hours), the labor cost equals $480

(16 × $30).

Manufacturing Overhead:

At 30% of direct labor → $144 ($480 × 0.30).

Total Job Cost:

$122 (materials) + $480 (labor) + $144 (overhead) = $746.

Cost per cookie: $746 ÷ 1,000 = $0.75.

3

Process Costing – Mixing Department

The Mixing Department handles the first stage of production. For 1,000 cookies:

• Direct Materials: $122 (added at the start).

• Direct Labor: Two employees × 4 hrs × $15/hr = $120.

• Overhead (30% of labor): $36.

• Conversion Costs (labor + overhead): $156.

• Cookies are 100% complete for materials, 40% complete for conversion.

→ Equivalent units for conversion = 1,000 × 0.40 = 400.

→ Cost per equivalent unit (conversion) = $156 ÷ 400 = $0.39/unit.

→ Total cost transferred from Mixing = $122 + (400 × $0.39) = $278.

The process costing system thus tracks costs by stage rather than by batch.

Sales Price

To achieve a 40% profit margin:

$0.75 × 1.40 = $1.05 per cookie (retail price).

Thus, total sales for 1,000 cookies = $1,050, yielding $304 profit.

Part 3: Compare and Contrast Costing Methods

Job Order Costing:

Applied in case products are custom or in small batches. Every job contains special

material, labor and overhead costs. It offers cost tracking in detail; it is suitable in business

producing limited or specialty goods (Iyenhen and Sabit, 2023). Job order costing is

advantageous to Cookie Haven since it can provide specific cost information at each batch of

4

cookies; therefore, the manager can not only track the efficiency of the resources, but also easily

change the price.

Process Costing:

Applied in large-scale manufacturing facilities and used continuously when production

needs a uniform product (Weygandt et al., 2019). It makes the accounting easier through the

averaging of costs among all units produced. Although process costing is not that detailed when

handling individual jobs, it assists in assessing the efficiency at each production stage.

Comparison and Managerial Usefulness:

In the case of Cookie Haven, which is involved with small-scale specialty production, job

order costing would be handier due to the ability to get a detailed view of materials and labor

elements consumed by specific batches. Nevertheless, when the company grows and starts mass

production and has many departments then the process costing will provide excellent control of

cost per unit and accountability of departments. Neither of the two systems can replace the other:

job order costing is valuable when the order is small and process costing is valuable when the

order should be scaled too numerous in the long-term.

Part 4: Effect of Increase and Decrease of Sales.

The sales vary directly with the quantity of cookies sold. At a sell of over 1,000 cookies,

the total revenue would grow at a higher rate than total cost, as fixed overhead would be evenly

distributed among the more cookies, and profitability will be high. On the contrary, inadequate

sales decreases revenues but a lot of expenses (rent, utilities, salaried wages) stay constant,

lowering net income. As an illustration, by selling 1,500 cookies managing at $1.05 each, the

revenue would be 1,575, however, the expenditures can increase insignificantly to approximately

1,050 and boost the profits. Volume growth, therefore, increases profitability with economies of

5

scale. Nonetheless, changes in demand necessitate close planning of production that would avoid

wastage of inventory and excessive labor.

Conclusions and Recommendations.

This project shows the role of managerial accounting in making decisions that are data-

driven in case of a small business. Using the job order costing is an opportunity that Cookie

Haven Company can take advantage of to trace materials and labor costs per batch and change

prices dynamically. The costing that the company uses will develop process costing because the

production capacity is going to be increased. The relevant markup of 40% is constant so that

prices could remain competitive and the profitability would not be lost.

To continue growing in future, the company should:

1.Use accounting programs to regulate monitoring of expenses.

2.Periodically need to look at the prices of your ingredient suppliers to maintain margins.

3.Find wholesale deals with cafes or hotels to even out the sales volume.

Using cost-accounting principles, Cookie Haven should have the ability to grow as a

local bakery to a regional brand without disorder in its financial discipline and operational

structure.

6

References

Iyenhen, C., & Sabit, M. S. (2023). The Evolution and Development of Management

Accounting Theories and Practices: A Review of Theoretical Frameworks. Central Asian Journal

of Innovations on Tourism Management and Finance, 4(2), 40-54.

https://cajitmf.casjournal.org/index.php/CAJITMF/article/view/422

Weygandt, J. J., Kieso, D. E., Kimmel, P. D., Trenholm, B., Warren, V., & Novak, L.

(2019). Accounting Principles, Volume 2. John Wiley & Sons.

https://books.google.com/books?hl=en&lr=&id=p6yXDwAAQBAJ&oi=fnd&pg=PA1&dq=Wey

gandt,+J.+J.,+Kimmel,+P.+D.,+%26+Kieso,+D.+E.+(2022).+Accounting+principles+(15th+ed.)

.+Wiley.&ots=NugQB7BEac&sig=NtZoSeQswokT3yokzlIJgoGqD7o

0

Robert Benders

Unit III Assignment

Professor Steve Horan

Columbia Southern University

ACC-5301

10/20/2025

1

The Cookie Haven Company

Introduction

Entrepreneurship business ventures can be started with a rather simple idea, which is a

natural combination of passion and market opportunity. This is a project based on the launching

of a small-scale cookie business under the context of managerial accounting. This aims to know

how cost-accounting systems, namely job order and process costing, can be used to support

strategic decisions made by the business. This paper illustrates how managers use accounting

data to assess profitability, efficiency and sustainability of a single product cookie company by

generating and analyzing production, costing and pricing data of this company.

Part 1: Cookie Business Startup.

Business Name and Location:

The corporation will be called Cookie Haven Company and it will be situated within the

city of Savannah, Georgia, which is characterized by tourism and a high level of hospitality in

the south that will point to the steady flow of visitors.

Mission Statement:

To make new handmade cookies with quality ingredients and care of an artisan to provide

our customers with comfort and pleasure in every bite.

Type of Cookie:

The cookies that Cookie Haven will focus on are Sea Salt Chocolate Chip Cookies that

will consist of locally sourced chocolate and butter and light sprinkling of sea salt. The company

has one specialty cookie to sell which will enable it to stay consistent in quality and accurately

manage its cost preservation.

2

Part 2: Sales Information and Costing.

Job Order Costing

The job order system is characterized by the treatment of each batch (1,000 cookies) as a

special production job. The accumulated costs are direct materials, combined direct labor and

manufacturing overhead (30 percent applied manufacturing overhead).

Direct Materials (per 1,000 cookies) Estimated Cost (USD)

Flour – 15 lbs @ $0.80/lb $12.00

Sugar – 10 lbs @ $1.00/lb $10.00

Butter – 15 lbs @ $4.00/lb $60.00

Chocolate Chips – 10 lbs @ $3.50/lb $35.00

Sea Salt & Vanilla – combined $5.00

Total Direct Materials $122.00

Direct Labor:

Two bakers each earn $15/hour. For two days (16 total labor hours), the labor cost equals $480

(16 × $30).

Manufacturing Overhead:

At 30% of direct labor → $144 ($480 × 0.30).

Total Job Cost:

$122 (materials) + $480 (labor) + $144 (overhead) = $746.

Cost per cookie: $746 ÷ 1,000 = $0.75.

3

Process Costing – Mixing Department

The Mixing Department handles the first stage of production. For 1,000 cookies:

• Direct Materials: $122 (added at the start).

• Direct Labor: Two employees × 4 hrs × $15/hr = $120.

• Overhead (30% of labor): $36.

• Conversion Costs (labor + overhead): $156.

• Cookies are 100% complete for materials, 40% complete for conversion.

→ Equivalent units for conversion = 1,000 × 0.40 = 400.

→ Cost per equivalent unit (conversion) = $156 ÷ 400 = $0.39/unit.

→ Total cost transferred from Mixing = $122 + (400 × $0.39) = $278.

The process costing system thus tracks costs by stage rather than by batch.

Sales Price

To achieve a 40% profit margin:

$0.75 × 1.40 = $1.05 per cookie (retail price).

Thus, total sales for 1,000 cookies = $1,050, yielding $304 profit.

Part 3: Compare and Contrast Costing Methods

Job Order Costing:

Applied in case products are custom or in small batches. Every job contains special

material, labor and overhead costs. It offers cost tracking in detail; it is suitable in business

producing limited or specialty goods (Iyenhen and Sabit, 2023). Job order costing is

advantageous to Cookie Haven since it can provide specific cost information at each batch of

4

cookies; therefore, the manager can not only track the efficiency of the resources, but also easily

change the price.

Process Costing:

Applied in large-scale manufacturing facilities and used continuously when production

needs a uniform product (Weygandt et al., 2019). It makes the accounting easier through the

averaging of costs among all units produced. Although process costing is not that detailed when

handling individual jobs, it assists in assessing the efficiency at each production stage.

Comparison and Managerial Usefulness:

In the case of Cookie Haven, which is involved with small-scale specialty production, job

order costing would be handier due to the ability to get a detailed view of materials and labor

elements consumed by specific batches. Nevertheless, when the company grows and starts mass

production and has many departments then the process costing will provide excellent control of

cost per unit and accountability of departments. Neither of the two systems can replace the other:

job order costing is valuable when the order is small and process costing is valuable when the

order should be scaled too numerous in the long-term.

Part 4: Effect of Increase and Decrease of Sales.

The sales vary directly with the quantity of cookies sold. At a sell of over 1,000 cookies,

the total revenue would grow at a higher rate than total cost, as fixed overhead would be evenly

distributed among the more cookies, and profitability will be high. On the contrary, inadequate

sales decreases revenues but a lot of expenses (rent, utilities, salaried wages) stay constant,

lowering net income. As an illustration, by selling 1,500 cookies managing at $1.05 each, the

revenue would be 1,575, however, the expenditures can increase insignificantly to approximately

1,050 and boost the profits. Volume growth, therefore, increases profitability with economies of

5

scale. Nonetheless, changes in demand necessitate close planning of production that would avoid

wastage of inventory and excessive labor.

Conclusions and Recommendations.

This project shows the role of managerial accounting in making decisions that are data-

driven in case of a small business. Using the job order costing is an opportunity that Cookie

Haven Company can take advantage of to trace materials and labor costs per batch and change

prices dynamically. The costing that the company uses will develop process costing because the

production capacity is going to be increased. The relevant markup of 40% is constant so that

prices could remain competitive and the profitability would not be lost.

To continue growing in future, the company should:

1.Use accounting programs to regulate monitoring of expenses.

2.Periodically need to look at the prices of your ingredient suppliers to maintain margins.

3.Find wholesale deals with cafes or hotels to even out the sales volume.

Using cost-accounting principles, Cookie Haven should have the ability to grow as a

local bakery to a regional brand without disorder in its financial discipline and operational

structure.

6

References

Iyenhen, C., & Sabit, M. S. (2023). The Evolution and Development of Management

Accounting Theories and Practices: A Review of Theoretical Frameworks. Central Asian Journal

of Innovations on Tourism Management and Finance, 4(2), 40-54.

https://cajitmf.casjournal.org/index.php/CAJITMF/article/view/422

Weygandt, J. J., Kieso, D. E., Kimmel, P. D., Trenholm, B., Warren, V., & Novak, L.

(2019). Accounting Principles, Volume 2. John Wiley & Sons.

https://books.google.com/books?hl=en&lr=&id=p6yXDwAAQBAJ&oi=fnd&pg=PA1&dq=Wey

gandt,+J.+J.,+Kimmel,+P.+D.,+%26+Kieso,+D.+E.+(2022).+Accounting+principles+(15th+ed.)

.+Wiley.&ots=NugQB7BEac&sig=NtZoSeQswokT3yokzlIJgoGqD7o