University of Technology and Applied Sciences - Al

Musanna

Department of Business Studies

ASSIGNMENT

Business of selling cupcakes.

Introduction:

As a result of the results of my poll, I've given the idea of opening a cup cake shop significant
thought. The shop's exclusive emphasis will be on cupcakes. I've come up with my own cooking
methods. This is a specialty of mine. For someone to come up with their own recipe is quite
uncommon. To help my business expand, I've come up with the concept of giving unique
incentives to clients in order to get them to know me. In meeting a skilled chef who is ready to
work with me on creating new flavors, I've been quite lucky. Dishes are chosen by myself and
the chef together.

Selling cupcakes is a trendy new trend, but outstanding cupcakes demand a sharp eye for design,
a refined taste, and a profound devotion to the art. As a bonus, if you're a genuine cupcake
addict, you should totally establish a cupcake-selling firm online. Its lot easier to get started
selling cupcakes online than it is to construct a brick-and-mortar facility and advertise it. That's
when online platforms come into play, even if you don't have any money to launch your firm.

Various list of production cost:

Product costs are the expenses involved in the process of creating a finished product for retail
sale. Direct material (DM), direct labour (DL), and manufacturing overhead (HO) are all
included in product costs (MOH).

Understanding the Costs in Product Costs

The expenses incurred during the production of a product are known as its product costs. Product
expenses are broken down into three main categories: 

Direct material

"Direct material costs" are the costs of raw materials or components directly utilized in the
manufacturing of commodities. The plastic used in the creation of toys, for example, would be an
example of a direct material cost for a toy producer.

Direct labor

Paying assembly line workers or those who operate manufacturing machines directly results in
direct labour expenses, such as salaries, benefits, and insurance, which are incurred by
individuals directly engaged in the production process. 

Manufacturing overhead

Manufacturing overhead expenses are direct factory-related costs that are spent while creating a
product, such as the cost of equipment and the cost to run the machinery. Manufacturing
overhead expenses also include various indirect expenditures, such as the following:

Indirect materials: A material is considered indirect if it is utilized in manufacturing but cannot

be linked to a specific product. Indirect materials include things like glue, oil, tape, and other
household cleaners.

Indirect labor: Workers who aren't directly involved in the production of the commodities,
known as "indirect labour," do their duties. A factory's safety and quality control staff, such as
security guards and quality control supervisors, make up the majority of its workers. The total of
their wages and benefits is what is referred to as an indirect labour expenditure.

Calculate materials consumed from the following information:

Opening stock of raw materials 18,000

2,
Purchase of raw materials 30,000
Carriage inward 27,000
 Sale of raw material scrap 8,000
Closing stock of materials 20,000

Add: Purchase of materials 4,

00,000

Add: Import duty and clearing charges 1,

00,000

Add: Carriage on purchase 60,000

Add: Transit insurance and handling charges 25,000

6,
35,000

Less: Return of defective materials to

supplier 40,000

Less: Sale of raw materials scrap 20,000

1,
Less: Stock of materials on 31.3.10 60,000 20,000

5,
Cost of materials consumed 15,000

From the following calculate the prime cost:

Stock on materials on 1.4.09 28,000

1,
Purchase of materials 60,000
Expenses in connection with purchases 20,000
Direct materials returned to supplier 20,000
Stock of direct materials on 31.3.10 35,000
Manufacturing wages 90,000
Royalty charges 75,000
Hire and maintenance charges of a special 45,000
machinery
Statement showing computation of prime cost:

Materials consumed:

Stock on materials on 1.4.09 28,000

1,
Add: Purchase of materials 60,000
 Add: Expenses in connection with purchases 20,000

2,
08,000

Less: Direct materials returned 20,000

Less: Stock of direct materials on 31.3.10 35,000 55,000 1,

53,000

Manufacturing wages 90,000

Direct expenses: 75,000

Royalty charges

1,
Hire and maintenance charges of a special machinery 45,000 20,000

3,
Prime cost 63,000

The following information is taken from the records of Cupcakes. For the month of XXX

01.04.2009 30.04.2009
| |
Stock of raw materials 37,500 41,250
Stock of work-in-progress 28,700 23,200
Stock of finished goods 46,400 53,200
Transactions during the month are:
Indirect materials 17,550
Productive wages 97,500
Indirect wages 20,900
1,
Purchase of materials 46,500
Other factory expenses 24,800

Administration expenses 41,600

Sale of factory scrap 2,400
Advertisement 26,500
Carriage outward 5,000
Sales 4 , 35,000
 Cost sheet for 6 months ending XXX

Ratio Model Model ‘B’

Particular
Total (|) ‘A’ (|) (|)

Materials Consumed:

Stock of materials

On 1.10.08 29,800

1,
Add: Purchase of materials 24,500

1,
54,300

Less: Stock of materials on 31.3.09 21,970 1,32,330 5:6 60,150 72,180

Direct labour 81,900 4:5 36,400 45,500

Prime cost 96,550 1,

17,680

Factory overheads 62,100 4:5 27,600 34,500

Works cost 1,24,150 1,

52,180

Office overheads 43,000 1:1 21,500 21,500

Cost of production 1,45,650 1,

73,680

Selling overheads 35,700 2:3 14,280 21,420

Total cost 1,59,930 1,

95,100

Profit: 20% on sales (or) 20/80 on cost 39,983 48,775

Sales 1,99,913 2,
43,875

Number of units produced 2,500 3,000

Selling price per unit 79.97 81.29

(Approx.) (Approx.)

Calculate profit and sales from the following:

5,
Cost of sales 00,000
 Profit 20% on sales
Profit |1, 25,000; Sales - |6, 25,000)

Material control techniques:

1. The cyclicality of raw materials' availability. Stocks of certain materials must be kept
high since they are only accessible for a limited time each year.
2. Hazardous substance that has inherent dangers such as fire and explosion is subject to
restrictions by the government or local authorities
3. It's possible that trends and habits may shift, requiring a shift in the kind of materials
needed.

Wages payment system:

Employees are often paid a wage by their employers. When raw materials are transformed into
finished commodities, this method of rewarding workers for their time and effort is used.
Employee compensation is based on their performance or on a time or output-based approach,
depending on the company's needs.

Distribute overhead cost:

Distribution in Proportion to Prime Cost: A company's overhead expenses are calculated as a

percentage of the company's overall costs. As a result, we

Rate of overhead = Total overhead costs/Total prime cost

By multiplying the overhead rate by the item's primary costs, the percentage of total overhead
costs that can be attributed to a particular manufacturing process may be calculated. To put it
another way, this method of assigning overhead costs does not take into consideration that the
rates at which labour is engaged, as well as the capacity and efficiency of the equipment
employed, may vary substantially while manufacturing two unique products.