COOKIE COMPANY

Student Name:

Student ID:

Course Name:

Date:
 1. Background

The reason behind forming the Cookie Factory Company started out with a committee

meeting to decide on the cookie kind, cookie size, cookie yield, and first investment. It was

ultimately agreed to make only one kind of cookie and sell them in two different quantities per

box: two and four. What's more, we're going to send all of our money to Nepal. Next, we divided

up tasks across team members according to their particular strengths. Because we had no idea

how to properly use the oven, we first burned the cookies. Then we got back together to amass

more facts and data prior to calling in an expert. Based on a recommendation from an Indian

restaurant chef friend of one of the company's founders, we decided to produce and market

quality chocolate chip cookies. In order to find the optimal component proportions for the

desired sweetness and smoothness, the creators enlisted the help of taste-testing friends. The

crew started and finished baking the cookies on the same day they bought the ingredients for

testing, which was Sunday, May 17, 2014. Unfortunately, the experiment was a failure since the

cookies were burned. We restocked on ingredients and engaged the help of bakers to ensure that

every batch of cookies was of the highest possible quality and taste. Two dozen cookies were

placed in clear plastic bags with the words "Thank you" written on them. The Cookies Factory

Company produced us videos to promote their cookies and get people talking about them on sale

day. In order to attract customers' attention, we decked up our booth with eye-catching paper,

tasty treats, and promotional images. We zeroed in on educators and learners from all corners of

the world. In less than 90 minutes after the company's May 22, 2015, cookie debut in the APU

cafeteria, more than 400 pieces had been sold. Three variables were utilized to determine how

quickly we finished our sale:

I. Outstanding decorating - We adorned our booth with vibrant paper that draws customers in
addition to lovely images and fascinating films.

II. Donation to Nepal - We informed our customers that 100% of our profits would be given to

Nepal, which piqued their curiosity and made them happy to make a purchase.

III. Delivery Service - In order to reach as many clients as possible, we placed several cookie

packets on a tray and separated some staff members to stroll around the cafeteria. We are happy

that we can contribute to helping Nepal and are quite thrilled of how quickly our items were sold.

2. Research and Development (R&D)

The Cookie Factory team had members who didn’t have any baking experience before the

project. So we thought research & development process would be needed to make cookies for

meeting customers’ tastes. In addition, we were introduced to Keshav Ahuja who was running a

restaurant in Beppu by one of our team member. So we could get good advice on how to make

cookies. During R&D, we focused on considering the following points:

 Points to consider

- Type of cookies that we can sell in APU

- Type of cookies that students are willing to buy from our company

- Type of cookies that could be differentiated from other companies

- How many cookies we should produce to avoid loss

- How much revenue to achieve target profit

Even though students like chocolate chip cookies, we discovered that there would be no

chocolate chip cookies served on selling day because they are too sweet, and difficult to make.

As a result, we decided to make semi-sweet chocolate chip cookies with support from Keshav
Ahuja, chef of Ahuja restaurant. Since the cookies should look nice and interesting, we also used

coco powder to provide brown color.

 Equipment

Thanks to Keshav’s help, we were able to use his restaurant between 3 to 5 p.m., when the

restaurant was closed for preparing dinner time. Therefore, we used the restaurant for the R&D

process and pre-sale production process. Fortunately, we also could borrow all the other

necessary supplies – spoons, forks, baking trays, pans, bowls, measuring cups, etc… - from the

restaurant on the day of our preparation.

 Recipe

After our market research, we decided to make chocolate chip cookies. But we did not decide

on the cookie shape until after the first baking practice, because we wanted to make a decision

after many attempts to shape the cookies by hand. Finally, we agreed the shape of cookie - circle

and 5cm in diameter. According to the size of cookie, we concluded a cookie recipe that fitted

our budget and also the expected profit. The final recipe is as follows:

[Ingredients] for 10cookies

Chocolate Chip··································100 g

Coco powder·····································15 g
 Flour··················································85 g

Butter················································125 g

Sugar powder····································30 g

Brown sugar······································30 g

Egg·····················································1

[Directions]

1. Preheat oven to 180 °C

2. Put the butter and sugars into a bowl and beat until creamy.

3. Add egg and mix well

4. Add flour and coco powder to the mixture and mix.

5. Add the chocolate chips and stir well.

6. Drop dough by rounded apart onto cookie sheet.

7. Bake in the oven for 15 minutes.

 First baking practice

We spent a total of 1,130 yen on the research and development of 20 biscuits. Through

trial and error, we figured out how long to bake the cookies for and how much sugar and flour to

use for optimal flavor and texture.

Our expenses are broken down as follow:

R&D Expenses (Materials) JPY 600.20

Overhead on R&D Materials JPY 180.06

 Total Fixed cost JPY 780.26

R&D process Quantity Cost for 20 Cost per

cookies cookie

Direct Materials 　 　

Flours 170g JPY 61.60 3.08

Chocolate chip 200g JPY 175.80 8.79

Coco powder 30g JPY 92.40 4.62

Butter 250g JPY 139.00 6.95

Sugar powder 60g JPY 49.20 2.46

Brown Sugar 60g JPY 49.20 2.46

Egg 2 JPY 33.00 1.65

Total Direct Materials 　 JPY 600.20 30.00

Overhead (0.30 x direct 　 JPY 180.06 9.00

material)

Labor cost (700/hour) 30min JPY 350.00 17.50

Grand Total per cookie 　 JPY 1130.2 56.50

*Notes:
  No costs associated with getting there or using the facilities have been included in

since they were provided at no cost (for example, the restaurant let us use their

electricity for free).

 Research and development (ii) shall be included as an outlay in the company's

financial statements.

Following fruitful R&D, we set the retail price of a box of two cookies at 150 yen ($0.02)

and a bundle of four cookies at 300 yen ($3.00). We determined the break-even threshold

in terms of units sold and Japanese yen by factoring in both fixed and variable expenses.

This is how our cookies stack up financially:

1) 2 cookies per package

Breakeven in unit = Fixed cost/ contribution margin per unit

= 780.26/ (150-56.50*2) = 21.09 packages

Breakeven in Yen = Breakeven in unit * selling price

= 3163.22 Yen

2) 4 cookies per package

Breakeven in unit = Fixed cost/ contribution margin per unit

= 780.26/ (300-56.50*4) = 10.54 packages

Breakeven in Yen = Breakeven in unit * selling price

= 3,163.22 Yen

 Cookie Specification
 Because we did not add baking soda to make soft cookies, the cookies retained the same size

and form after baking as they did before. The only kind of cookie we made were chocolate chip

cookies. We packaged them in two sizes: two cookies per box and four cookies per package.

 Budgeting

We decided our sales price 75yen per one cookie. And make our budget for final production

is as follows:

Budgeting 450 cookies unit (per cookie)

Sales JP 33,750 75.00

Variable Expense JP

Direct Material JP 13,500 30.00

Labor Cost JP 7,875 17.50

Overhead Cost JP 4,050 9.00

Total Variable Expense JP 25,425 56.50

Contribution Margin JP 8,325 18.50

Fixed Expense JP

Y
 R&D Expense JP 1,130 2.51

Operating Income JP 7,195 15.99

3. Job Measurement Document

After purchasing all materials needed, we did the cookies production part (both baking and

packaging) on Wednesday, May 20th from 3 pm to 5pm.

Cost per cookie 50.67

Cookie Production

Number of cookies produced 450

Number meeting specs 450

Number rejected 0

Number reworked 0

Unexplained differences 0

Total cookies available (1) 450

Cookies sample for quality control (2) 7

Cookies for tasting on selling date (3) 7

Total cookies for selling (= 1 – 2 – 3) 436

 * 50 packages of 4 cookies (200 cookies /4 cookies per pack) and 118

package of 2 cookies (236 cookies / 2 cookies per pack)

Cookie Size

Size of cookies before baking 5 cm

Size of cookies after baking 5 cm

Cookie Preparation Time

Mixing time 20 min

Time portioning cookies onto bake sheet 25 min

Bake time for one cookie sheet x Number of cookie sheets processed (2 30 min

cookies sheets for every 15 minutes)

Packaging time 25 min

Downtime –

Clean-up time 20 min

Total throughput time (for each person) 2 hours

Required Comments:

 What should be the denominator for the cost per cookie calculation?

We made a total of 450 cookies, but 14 of them went toward quality control samples or

customer tastings on sale days, meaning we lost money on those sales. This led us to divide total

production expenses by the remaining 436 cookies in stock to arrive at our cost per unit.
  What measures would your group use to effectively evaluate production performance?

The production efficiency was measured by calculating the percentage of finished cookies

that met quality standards relative to the total number of cookies manufactured. With us, it was

perfect in every way: flavor, look, and consistency. This high success percentage may be

attributed mostly to thorough research and development testing carried out before the real pre-

sale period baking took place.

 What measures were unnecessary? Why?

Since we utilized a squeezer to portion out each cookie onto the baking trays, which made it

simpler to create accurate size, we didn't need to make any cookies over, which reduced the

number of cookies that were rejected, redone, or had inexplicable variances. The fact that we had

previously done extensive testing and recipe revisions throughout the development phase

allowed us to weed out the bad cookies.

4. Job Order Cost Card

The job order cost card for our project is illustrated on the next page.

Required Comments:

 Evaluating the overhead rate.

The true overhead rate can be more than $2 for every $1 spent on direct supplies and labor.

In our instance, however, we were able to complete the majority of the job without spending any

money on overhead since we had access to free resources like water, power, ovens, and so on.

That's why we've settled on a reasonable overhead rate of 0.3 dollars for every dollar of direct

materials cost (0.3 yen for every 1 yen).

  What is our group’s consensus on disposing of our overhead variance?

Since the calculated overhead and the actual overhead both came in at 3,766 yen, our

overhead variance was zero. Since there was no overage variance, we did not have to write it off.

The Cookie Factory Company

Job Cost Card

Product: Chocolate chip cookies Date completed: May 20th, 2015

Number of cookies produced for sale: 436 Time started: 3pm ; Time completed: 5pm

Manufacturing
Direct Materials Cost Direct Labour Cost
Overhead Cost

Cost per Cost per Cost

Materials Amount Hour Rate
unit** hour applied

Flours 4kg 300 yen 2 hours x 700 yen 0.3 yen 3,766

6 workers for every

Chocolate chip 4.5kg 750 yen
1 yen

7 direct

Coco powder packages 300 yen materials

of 100g cost

Butter 5.5kg 565 yen

Sugar powder 1.5kg 750 yen

 Brown sugar 1.5kg 750 yen

Eggs packages 130 yen

of 12 eggs

Total direct materials cost 12,553

Cost Summary and Unit Costs

Total Costs (in yen) Unit Costs (in yen)

Direct materials costs 12,553 28.79

Direct labour costs 8,400 19.27

Manufacturing overhead costs 3,766 8.64

Cost of finished goods manufactured (436) 24,719 56.69

* Note: The Job Cost Card above is based on the following assumptions:

 The labor cost per hour of 700 yen was applied based on the fact that this is the minimum

amount of salary, which can be earned from part-time jobs.

 In order to calculate the overhead rate, we considered the following costs:

I. Electricity, ovens: these were free since we were able to use all equipment at our

friend’s restaurant.

II. Transportation: we actually bought ingredients for the project when we went

shopping in the weekend as usual; so transportation costs can be considered as free.

 III. Indirect labor: necessary to purchase, make calculations, and sale the cookies; but

these costs are irrelevant since we did not get paid.

5. Results

Total Sales Revenue:32,700 Yen

Revenues and Expenses: Budget against Actual

Budget Actual Per cookie analysis

Budget 450 Cookies 436 Cookies Budget Actual

Sales 33,750 32,700 75.00 75.00

Variable Expense

Direct Material 13,500 12,553 30.00 29.79

Labor Cost 4,050 8,400 9.00 19.27

Overhead Cost 7,875 3,766 17.50 8.64

Total Variable Expense 25,425 24,719 56.50 56.59

Contribution Margin (ratio) 8,325 (24.7%) 7,981 (24.4%) 18.50 18.31

Fixed Expense

R&D Expense 1,130 1,130

Total Fixed Expense 1,130 1,130

Operating Income 7,195 6,851

In budget, the contribution margin ratio is 24.7 %. On the other hand, the actual
contribution margin ratio is 24.4 %. Even though the overhead cost from the budget was reduce

by half, the contribution margin ratio has hardly changed due to the labor cost has doubled.

Total Amount Available for Donation

The Cookie Factory

Total Charity Donation

May 22, 2015

(in yen)

Operating Income 6,851

Add Virtual Expenses:

Direct Labor – R&D 350

Direct Labor – Production 8,400

Overhead (R&D) 180

Overhead (Production) 3,766

Total Amount Available for JPY 19,547

Donation

There is a total of 19,547 JPY (Japanese yen) available for contributions. The calculated

total takes into account the hypothetical inclusion of direct labor and overhead expenditures in

operational revenue. In this case, charitable giving accounted for 59.8 percent of total sales.

Variance Analysis
 Actual Quantity Actual Quantity Standard Quantity

X X X

Actual Price Budget Price Budget Price

436 pieces X 75 yen/piece 436 pieces X 75 yen/piece 450 piece X 75 yen/piece

= 32,700 yen = 32,700 yen = 33,750 yen

Which results in

Overall Budget (1050) Unfavorable

Variance

Price Variance (0) Neutral, Satisfactory

Volume variance (1050) Unfavorable

The total amount of Japanese yen (JPY) available for donations is now 19,547. The

estimated sum factors in indirect costs and labor costs that may be included in operating income

in a hypothetical scenario. Here, philanthropic contributions made up 59.8 percent of total

revenue.

The Cookie Factory

Income Statement

May 22, 2015

Sales JPY JPY

 Sales 32,700

Direct Materials Expenses – R&D 600

Direct Materials Expenses – Production 12,553

Overhead (R&D) 180

Overhead (Production) 3,766

Direct Labor – R&D (30 min) 350

Direct Labor – Production (12 hours) 8,400

Total Expenses 25,849

Net Income 6,851

After factoring in both direct and indirect costs, we see a net profit of JPY 6,851. Adding

the expenses of indirect and direct labor to the net income yields the true amount of cash on hand

of JPY 19,547. In this scenario, we just considered the upfront resources needed.

References

“Best Resources to Learn Microsoft Excel.” Analytics Vidhya,

www.analyticsvidhya.com/resources-excel/. s

“MyOnlineTrainingHub - YouTube.” Www.youtube.com,

www.youtube.com/user/MyOnlineTrainingHub.
“Superstore.” Www.kaggle.com, www.kaggle.com/shobanama/superstore.