Scribd Logo
Upload

Welcome to Scribd!

  • 66 views

    Budgeting

    Uploaded by

    Kalsia Robert
    Bakery Plus produces baked goods in Jamaica and wants to improve profits. Management is considering adding gourmet meat pies for hotels to utilize excess capacity and improve competitiveness. The document provides Bakery Plus's current income statement and additional information on cost adjustments from implementing Kaizen costing and introducing a new product. Management seeks a budgeted income statement incorporating these changes to evaluate the new opportunity.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Budgeting

    Uploaded by

    Kalsia Robert
    66 views2 pages
    Bakery Plus produces baked goods in Jamaica and wants to improve profits. Management is considering adding gourmet meat pies for hotels to utilize excess capacity and improve competitiveness. The document provides Bakery Plus's current income statement and additional information on cost adjustments from implementing Kaizen costing and introducing a new product. Management seeks a budgeted income statement incorporating these changes to evaluate the new opportunity.

    Original Description:

    Management Accounting

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Bakery Plus produces baked goods in Jamaica and wants to improve profits. Management is considering adding gourmet meat pies for hotels to utilize excess capacity and improve competitiveness. The document provides Bakery Plus's current income statement and additional information on cost adjustments from implementing Kaizen costing and introducing a new product. Management seeks a budgeted income statement incorporating these changes to evaluate the new opportunity.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    66 views2 pages

    Budgeting

    Uploaded by

    Kalsia Robert
    Bakery Plus produces baked goods in Jamaica and wants to improve profits. Management is considering adding gourmet meat pies for hotels to utilize excess capacity and improve competitiveness. The document provides Bakery Plus's current income statement and additional information on cost adjustments from implementing Kaizen costing and introducing a new product. Management seeks a budgeted income statement incorporating these changes to evaluate the new opportunity.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Bakery Plus produces a variety of baked goods which are sold to supermarkets and other

    outlets in Jamaica. Sales in the market have been sluggish so management is talking steps
    to improve profitability and utilize some idle capacity in the bakery. The management
    has been introduced to Kaizen costing at a seminar given by Ministry of industry and
    commerce as a means of improving the competiveness of business in the country. It was
    at this seminar that the management was invited to pursue an opportunity to add a
    specialty product for the hotel sector. Management believes that sales revenues will
    remain unchanged for the next 2 years for the existing range of product but still would
    like to increase profits. To this end they are including the budgeted value of the new
    opportunity to prepare gourmet Jamaican meat pies for export. The most recent income
    statement is given below before incorporating the new product.

    Revenues 22,500,000
    Cost of goods sold 14,625,000
    Gross profit 7,875,000
    Operating expenses
    Quality testing and assurance 515,225
    Marketing cost 1,125,380
    Distributive cost 644,275
    Customer service cost 343,130
    Administrative cost 3,527,360
    Total operating cost 6,155,370
    Operating income 1,719,630
    Other expenses (interest) (257,945)
    Income before taxes 1,461,685
    Income taxes (438,505)
    Net income $1,023,180

    Additional information for existing production


    The management team has determined to make the following cost adjustments. The direct
    material is 35% of the cost of goods sold. There will be a 7% reduction in material cost as
    a result of buying material in bulk from a new supplier.
    Direct labor which is 40% of cost of goods sold will increase by 4% based on the
    collective barging process.
    Quality Testing and Assurance is a key cost and due to the additional product will
    increase by 15%. Marketing and Interest cost will also increase by 10% and 6%
    respectively due to the new product line.
    The other operating expenses will be reduced as follows: Customer service cost 2.5%,
    and Administrative cost 4%.
    The projected information for the new product is as follows:
    Budgeted sales in units 24,000
    Budgeted selling price per unit $75.00
    Cost of ingredients per unit $35.00
    Labour cost per unit $ 5.00
    Batch levels cost per batch $2,375.00
    Number of units per batch 250

    Required

    Prepare the budgeted income statement if the Kaizen costing adjustments are realized for
    the next year and the new product is launched based on the sales estimates.

    You might also like