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Cake Costing & Pricing Analysis

The document outlines the process of product costing for a cake, detailing direct materials, labor, and manufacturing overhead costs, which total Rs. 7370 per cake. It also suggests a selling price of Rs. 9600, factoring in a 30% profit margin. The cake is described as a sweet dessert made from various ingredients and is commonly served at celebrations.

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Ahmer Naeem
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40 views5 pages

Cake Costing & Pricing Analysis

The document outlines the process of product costing for a cake, detailing direct materials, labor, and manufacturing overhead costs, which total Rs. 7370 per cake. It also suggests a selling price of Rs. 9600, factoring in a 30% profit margin. The cake is described as a sweet dessert made from various ingredients and is commonly served at celebrations.

Uploaded by

Ahmer Naeem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Management Accounting

Submitted By:
Tahira Shabbir
Ahmer Naeem
Tuba Ishaq
Wajiha Khan
Amna Arshad

Submitted To:
Ms. Sara Qaim
PRODUCT CAKE
A cake is a sweet, baked dessert typically made from flour, sugar,
eggs, and butter or oil, often combined with other ingredients like
milk, vanilla, and baking powder or soda to provide texture and rise.
It can be flavored with fruits, chocolate, spices, or nuts, and is often
layered with fillings such as cream, frosting, jam, or fruit. Cakes
come in a variety of forms, from simple single-layer cakes to
elaborate multi-layer creations, and are commonly served at
celebrations like birthdays, weddings, and holidays. The outer
surface is usually decorated with icing or fondant, and cakes may be
garnished with sprinkles, fruits, or edible flowers for added appeal.

Product Costing

1. Direct Materials
The raw materials used to make a Cake
Ingredients:

4 large eggs (room temperature)= Rs 150

1 cup (200g) granulated sugar=Rs 140

1 cup (120g) all-purpose flour=Rs 160

1/4 cup (30g) cocoa powder (unsweetened)=Rs 600


1 tsp vanilla extract=Rs 300

1/4 cup (60ml) warm milk=Rs 500

1/2 tsp baking powder (optional, for extra lift)=Rs 120

A pinch of salt=Rs 50

Icing/Frosting=Rs 1500

Food Colors=Rs 50

Total = Rs 3570

2.Direct Labor Cost

Cost of labor involved in making a cake


Salary of a Pastry chef in Pakistan=Rs 1200/hour
Time to prepare a cake: 3 hours=Rs 500

Total Direct Labor Cost = 1200 x 3 = Rs3600

2. Manufacturing Overhead (MOH)

a) Gas/Electricity for baking:


Gas cost per hour = Rs. 200
Baking time = 45 minutes (0.75 hours)
Gas cost for baking = Rs. 200 * 0.75 = Rs. 150

b) Equipment Depreciation (Oven):

Oven cost = Rs. 50,000


Estimated lifespan = 10 years
Monthly depreciation = Rs. 400
Cost per cake (assuming 30 cakes per month) = Rs. 400 ÷ 30 = Rs.
13.33 (rounded to Rs. 10 for simplicity)

c) Cleaning and Packaging:

Cleaning supplies = Rs. 10


Cake box = Rs. 30
Total cleaning and packaging cost = Rs. 10 + Rs. 30 = Rs. 40
Total Manufacturing Overhead (MOE) = Rs. 150 (Gas) + Rs. 10
(Depreciation) + Rs. 40 (Cleaning & Packaging) = Rs. 200

Total Product Cost for One Cake


Now, let's add all the costs together:

Direct Materials Cost = Rs. 3570


Direct Labor Cost = Rs. 3600
Manufacturing Overhead = Rs. 200
Total Cost per Cake = Rs. 3570 + Rs. 3600 + Rs. 200 = Rs. 7370

Suggested Selling Price


To determine the selling price, you should factor in a profit margin.
If you are targeting a 30% profit margin, for example:

Desired Profit = 30% of Rs. 7370 = Rs. 2211


Selling Price = Rs. 7370 + Rs. 2211 = Rs. 9581
So, a reasonable selling price for the Customize cake would be
around Rs. 9600.

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