Samin Yasar Ul Islam

ID: 1920022
Course Title: Cost Accounting 1
Course ID: ACN405
Semester: Autumn 2021
Section: 02
Independent University, Bangladesh
Date of Submission: 7TH December 2021

Submitted to,
Naveed Adnan
Lecturer, School of Business
Independent University, Bangladesh

1
Contents
Business Synopsis ......................................................................................................................................... 3
Projected Financial Statement ..................................................................................................................... 4
Income statement .................................................................................................................................... 4
Projected Balance Sheet .......................................................................................................................... 7
Projected Cashflow ................................................................................................................................ 10
Products of the Start-up:............................................................................................................................ 13
Revenues .................................................................................................................................................... 13
Variable and Fixed Cost.............................................................................................................................. 14
Activities and Cost Drivers of the Business: .............................................................................................. 15
Simple Costing ............................................................................................................................................ 15
ABC COSTING .............................................................................................................................................. 16
Manufacturing Account ............................................................................................................................. 17
Production Budget ..................................................................................................................................... 18
Raw Materials Budget ................................................................................................................................ 18
Cash Budget ................................................................................................................................................ 20
References .................................................................................................................................................. 21

2
Business Synopsis

Chocolatery bakery is a start - up situated in Dhaka, Bangladesh. The Chocolatery bakery aims to
make high-quality handmade desserts more accessible and affordable to the general public.
Currently, the business is based on online and uses social media platforms like Facebook and
Instagram to make ordering as simple as a few clicks. Chocolatery bakery anticipates that its high-
quality luxury cakes at extremely competitive rates will soon attract the interest of customers and
help it create a solid client base.

When I was horrified at the excessive rates charged for handcrafted cakes that tasted no different
than the mediocre cakes offered in regular shops, I got the idea for the startup. With my hard-
earned cash and a passion for baking, I started out on my own to remind the world what a delicious
cake tastes like.

Chocolatery bakery provides handmade cakes created with the freshest and best quality ingredients
at costs that are competitive with ordinary bakery cakes. The cakes' recipes are based on classics
reinvented with a refined edge by world-renowned restaurants and chefs, so they're not just
evocative of your childhood birthdays, but also so luxury that they're worth the price, and more
crucially, the calories.

The main products of chocolatery bakery are

• Chocolate fudge cake

• Dark chocolate cake.

Mission and vision

• Chocolatery bakery believes that its high-quality luxury cakes at extremely competitive
rates will soon capture the attention of clients and help it to establish a loyal customer base.

• It is our goal to provide such satisfying and value-added items that Chocolatery bakery
becomes a leading name among clients throughout Dhaka.

3
Online companies are currently growing as a result of Covid-19. Considering the fact that the
situation is improving, people continue to choose to buy from such businesses just for convenience.
Chocolatery bakery aims to capitalize on this shift in consumer tastes by becoming one of the first
handcrafted bakeries in Dhaka to be based online.

Projected Financial Statement

Income statement
Chocolatery bakery
Projected Income Statement

For the first year of the startup

All amounts are in Taka

Revenue 200000
Cost of Goods Sold (-)
Beginning finished goods
_
inventory
Cost of Goods Manufactured 120000
Cost of Goods Available for sale 120000
Ending finished goods inventory 0
Cost of Goods Sold 120000
Gross Profit 80000
Operating Costs: (-)
Delivery man wages 34000
Delivery Bicycle Rent 11400
Marketing Expense 6400
Social Media Manager Wages 11000
Internet Expense 6000
Packaging Expense 6900
Total Operating Costs 75,700
Net profit 4,300

4
 Chocolatery bakery
Projected Income Statement

For the second year of the startup

All amounts are in Taka

Revenue 300000
Cost of Goods Sold (-)

Beginning finished goods inventory _

Cost of Goods Manufactured 100000

Cost of Goods Available for sale 100000

Ending finished goods inventory 0

Cost of Goods Sold 100000

Gross Profit 200000
Operating Costs: (-)
Delivery man wages 50000

Delivery Bicycle Rent 16000

Marketing Expense 8000

Social Media Manager Wages 20000

Electricity Expense 10000

Packaging Expense 8000

Total Operating Costs 112,000

Net profit 88,000

5
 Chocolatery bakery
Projected Income Statement

For the third year of the startup

All amounts are in Taka

Revenue 360000
Cost of Goods Sold (-)

Beginning finished goods _

inventory
Cost of Goods Manufactured 120000

Cost of Goods Available for sale 120000

Ending finished goods inventory 0

Cost of Goods Sold 120000

Gross Profit 240000
Operating Costs: (-)
Delivery man wages 60000

Delivery Bicycle Rent 20000

Marketing Expense 10000

Social Media Manager Wages 22000

Electricity Expense 15000

Packaging Expense 10000

Total Operating Costs 137,000

Net profit 103,000

6
 Projected Balance Sheet

BALANCE SHEET
Chocolatery bakery
Projected Balance Sheet
End of the 31st of December, 1st year of the
start up
ASSETS
Current Assets:
Cash 32,000
Accounts Receivable 11,000

Direct Materials 1500

Inventory
Total current asset 44,500

Non Current Asset

Toaster Oven 15000

Less: accumulated 750 14250

depreciation

Electric beater 2600

Less: accumulated 260 2340
depreciation
Baking Tins and Pans 3600
Less: accumulated 360 3240
depreciation
Total Non-Current 19,830
Assets
TOTAL ASSETS 64,330
LIABILITES &
EQUITY
Current Liabilities:
Accrued Expenses 8,300

7
 Equity:
Invested Capital 30,000
Retained Earnings 18,440 56,000
TOTAL LIABILITIES AND EQUITY 64,300

BALANCE SHEET
Chocolatery bakery
Projected Balance Sheet
End of the 31st December, second year of the start up
ASSETS
Current Assets:
Cash 60,000
Accounts Receivable 16,000

Direct Materials Inventory 2400

Total current asset 78,400

Non Current Asset

micowave oven 21000

Less: accumulated depreciation 900 20100

Blender 4000
Less: accumulated depreciation 400 3600

Multi Shape Pan 4000

Less: accumulated depreciation 360 3640

Total Non-Current Assets 27,340

TOTAL ASSETS 105,740

LIABILITES & EQUITY
Current Liabilities:
Bank loan 29,740

8
 Accrued Expense 10000
Equity:
Invested Capital 40,000
Retained Earnings 10,000 56,000
TOTAL LIABILITIES AND EQUITY 95,740

BALANCE SHEET
Chocolatery bakery
Projected Balance Sheet
End of the 31st December, third year of the start up
ASSETS
Current Assets:
Cash 70,000
Accounts Receivable 18,000

Direct Materials Inventory 3000

Total current asset 91,000

Non Current Asset

Refrigerator 25000

Less: accumulated depreciation 250 24750

Stove 4000
Less: accumulated depreciation 400 3600

Frying Pan 4000

Less: accumulated depreciation 360 3640

Total Non-Current Assets 31,990

TOTAL ASSETS 122,990

LIABILITES & EQUITY
Current Liabilities:

9
 Bank loan 54,900
Accrued Expense 12000
Equity:
Invested Capital 40,000
Retained Earnings 10,000 56,000
TOTAL LIABILITIES AND 122,900
EQUITY

Projected Cashflow
Chocolatery bakery

Projected Statement of Cashflows

For the First year of Operation

Cashflows from Operating Activities:

Net Income 44,300

Adjustments to reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation Expense 1150

Increase in accounts receivable 11,000

Increase in accrued expenses 8,300

Increase in direct materials inventory 1500 -3,050

Net cash provided by Operating Activities 41,250

10
Cash flows from Investing Activities:

Purchase of toaster oven 15000

Purchase of electric beater 2600

Purchase of baking pans and tins 3600

Net cash used by Investing Activities 21,200

Net increase in cash 20,050

Cash at the beginning of the period 11,950

Cash at the end of the period 32,000

Chocolatery bakery

Projected Statement of Cashflows

For the second year of Operation

Cashflows from Operating Activities:

Net Income 88,000

Adjustments to reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation Expense 1660

Increase in accounts receivable 16,000

Increase in accrued expenses 10,000

Increase in direct materials inventory 1500 -5,840

11
 Net cash provided by Operating Activities 82,160

Cash flows from Investing Activities:

Micowave oven 21000

Blender 4000

Multi Shape Pan 4000

Net cash used by Investing Activities 29,000

Net increase in cash 53,160

Cash at the beginning of the period 6,840

Cash at the end of the period 60,000

Chocolatery bakery

Projected Statement of Cashflows

For the third year of Operation

Cashflows from Operating Activities:

Net Income 103,000

Adjustments to reconcile Net Income to Net Cash Provided by Operating Activities:

Depreciation Expense 1010

Increase in accounts receivable 18,000

Increase in accrued expenses 12,000

12
 Increase in direct materials inventory 1500 -6,490

Net cash provided by Operating Activities 96,510

Cash flows from Investing Activities:

Refrigerator 25000

Stove 4000

frying pan 4000

Net cash used by Investing Activities 33,000

Net increase in cash 63,510

Cash at the beginning of the period 6,490

Cash at the end of the period 70,000

Products of the Start-up:

Currently, the products being sold at Chocolatery bakery will be the 500gm Cake and the
1000gm Cake.

(ALL CALCULATIONS ARE BASED ON THE FIRST YEAR PROJECTED FINANCIAL

STATEMENTS OF THE START UP)

Revenues
Chocolatery bakery

Calculation of Revenues

For the beginning year of the start up

13
 Chocolate Dark Chocolate
Fudge Cake Cake
Number of units sold 100 110

Selling price per unit

900 1000
(Taka)
Total Revenue per
90,000 110,000
product

Total Revenue 200,000

Variable and Fixed Cost

Variable Cost
Dark Chocolate
Chocolate Fudge Cake
Cake
Direct materials (Taka) 125 150
Direct labor : number of
2 2
labor hours
Labor rate per hour
100 100
(Taka)
Labor cost per cake
200 200
(Taka)
Packaging (Taka) 45 50

Annual
Fixed Cost Per month (Taka)
(Taka)
Deliveryman Salary 2833.333333 34000
Delivery bicycle rent 950 11400

14
 Marketing costs 533.3333333 6400

Electricity expense 500 6000

Social media manager
916.6666667 11000
Salary
Depreciation:
Toaster oven 62.5 750
Electric beater 21.66666667 260
Baking pans and tins 30 360
Total fixed cost 5847.5 70170

Job Chocolate Fudge Cake Dark Chocolate Cake

Activities and Cost Drivers of the Business:

Dark
Chocolate Fudge
Activities Cost Driver Chocolate
Cake
Cake
Production Oven hours 1 1.5

Delivering Delivery hours 2 2

Marketing 3,2% of sales

Selling Number of units sold 100 110

Simple Costing

Budgeted Overhead rate = total overheads/total oven hours

= 264.792458 per oven hour

Chocolatery bakery
Simple Costing Profit and Loss Account

Chocolate Fudge Cake Dark Chocolate Cake

Revenue 90,000 110,000

15
Direct Materials (-) 12,500 16,500
Direct Labor (-) 20,000 22,000
Gross Profit 57,500 71,500
Expenses:
Allocated overheads (-)
(401.9759036 x95) 26,479.25 43690.75472
(401.9759036*112.5)
(264.7924528 x100)
(264.7924528*165)
Packaging (-) 4500 5500
Net Income 26,521 22,309

ABC COSTING
Total Activity Driver
Activity Cost Driver Allocation Rate
cost (Taka) Quantity
per oven
Production 7370 Oven hours 265 27.81132075
hour
per
Delivering 45,400 Delivery hours 420 108.0952381 delivery
hour
Percentage of per taka
Marketing 6400 0.032
revenues sales
per unit
Selling 11000 Units sold 210 52.38095238
sold

Chocolatery bakery
ABC Costing Profit and Loss Account

Chocolate Fudge
Dark Chocolate Cake
Cake
Revenue 90,000 110,000
Direct
12,500 16,500
Materials
Direct
20,000 22,000
Labor
Gross Profit 57,500 71,500
Expenses:
Allocated
activity
costs: (-)

16
 2,781.13 3,059.25
Production
21,619.05 23,780.95
Delivery
2880 3520
Marketing
5238.095238 5761.904762
Selling
Packaging
4500 5500
costs
Net Income 20,481.7250673854 36,918

Manufacturing Account
Chocolatery bakery
Projected Schedule of Cost of Goods Manufactured
For the First year of Operation

Direct Materials:
Beginning Inventory -
Purchase of direct materials 30,500
Cost of Direct materials
30,500
Available for use
Ending Inventory 1500
Direct Materials Used 29,000
Direct manufacturing Labor 42,000
Manufacturing Overhead Costs:
Electricity expense 6000
Depreciation: Oven 750
Electric stand
260
mixer
Baking pans and
360
tins
Total Manufacturing
7370
Overhead Costs
Manufacturing Costs Incurred 80,000
Beginning Work in Progress
0
Inventory
Total Manufacturing Costs to
80,000
account for
Ending Work in Progress Inventory 0

17
Cost of Goods Manufactured 80,000

Production Budget
Chocolatery bakery
Production Budget for Chocolate Fudge Cake
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year

Budgeted Unit Sales 20 15 30 35 100

Add: desired units of finished

0 0 0 0 0
goods inventory

Total Needs 20 15 30 35 100

Less: units of beginning finished
0 0 0 0 0
goods inventory
Required Production in Units 20 15 30 35 100

Chocolatery bakery
Production Budget for Black Forest Cake
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year

Budgeted Unit Sales 25 20 25 40 110

Add: desired units of finished

0 0 0 0 0
goods inventory

Total Needs 25 20 25 40 110

Less: units of beginning finished
0 0 0 0 0
goods inventory
Required Production in Units 25 20 25 40 110

Raw Materials Budget

Chocolatery bakery
Direct Materials Budget for Chocolate Fudge Cake
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year
Required Production in Units of
20 15 30 35 100
Finished goods

18
Batches of raw materials need per unit
1 1 1 1 1
of finished goods
Batches of Raw materials needed to
20 15 30 35 100
meet production
Add desired batches of ending raw
0 6 6 6 6
materials inventory

Total batches of raw materials needed 20 21 36 41 106

Less: Batches of beginning raw

0 0 6 6 0
materials inventory
Batches of raw materials to be
20 21 30 35 106
purchased

Batch cost of raw materials 125 125 125 125 125

Cost of raw materials to be purchased 2500 2625 3750 4375 13250

Chocolatery bakery
Direct Materials Budget for Black Forest cakes
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Required Production in Units of
25 20 25 40 110
Finished goods
Batches of raw materials need
1.5 1.5 1.5 1.5 1.5
per unit of finished goods
Cost of Raw materials needed to
37.5 30 37.5 60 165
meet production
Add desired batches of ending
0 6 6 6 6
raw materials inventory
Total batches of raw materials
37.5 36 43.5 66 171
needed
Less batches of beginning raw
0 0 6 6 0
materials inventory
Batches of raw materials to be
37.5 36 37.5 60 171
purchased

Batch cost of raw materials 125 125 125 125 125

Batch of raw materials to be
4687.5 4500 4687.5 7500 21375
purchased

19
 Cash Budget
Chocolatery bakery

Cash Budget Necessary Workings

3rd
1st Quarter 2nd Quarter 4th Quarter
Quarter

Derivation of Cash
Receipts:
Total Sales revenue
(units produced x selling 43,000 33,500 52,000 71,500
price)
Decrease/(increase) in
3000 3000 2,000 3,000
receivables

Total Cash Receipts 40,000 30,500 50,000 68,500

Derivation of Cash
Disbursements:

Direct materials
6250 4875 7500 10375
Direct labor (units
produced x labor hours x
labor rate)
5750 4500 6750 9500
Overheads 1842.5 1842.5 1842.5 1842.5
Other Expenses 9857.5 17507.5 17857.5 21357.5
Packaging costs (units
produced x packaging
cost rate)
2150 1675 2600 3575
Purchase of Assets 21200
Decrease in payables 8300

20
Total Cash
disbursements 47050 30400 44850 46650

Chocolatery bakery
Cash Budget
2nd 3rd
1st Quarter 4th Quarter Year
Quarter Quarter

Beginning Cash Balance 11950 4900 5000 10150 32000

Total Cash Receipts 40000 30500 50000 68500 189000

Total Cash Available 51950 35400 55000 78650 221000

Less Total Cash Disbursements 47050 30400 44850 46650 189000

Excess/ (Deficiency) of Cash

4900 5000 10150 38600 58650
Available over Disbursements

Financing: - - - - -

Borrowing - - - -

Repayments - - - - -

Interests - - - - -

Total Financing - - - - -

Ending Cash Balance 4900 5000 10150 32000 32000

References
• 7 steps to create a better cash flow budget - Liquid Capital, Liquid Capital, 2021 retrieved from
https://liquidcapitalcorp.com/blog/cash-flow-2/7-steps-to-create-your-cash-flow-budget

21
• Horngren, Dattar and Rajan, " Horngren’s Cost Accounting: A Managerial Emphasis,"
16th edition, Prentice-Hill Pearson

22