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Accounting and Finance Essentials

Accounting and Finance Essentials. Presented by Bill Moylan. STANDARD COSTS. Ginny’s Vermont Treats. Ginny decides to start a business making and selling Vermont Maple Syrup and Maple Treats, and calls it “Ginny’s Vermont Treats” (GVT). GVT Standard Costs.

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Accounting and Finance Essentials

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  1. Accounting and Finance Essentials Presented by Bill Moylan

  2. STANDARD COSTS

  3. Ginny’s Vermont Treats • Ginny decides to start a business making and selling Vermont Maple Syrup and Maple Treats, and calls it “Ginny’s Vermont Treats” (GVT)

  4. GVT Standard Costs • Let’s assume we make and sell two maple-based product lines: • Maple Syrup, available in 8 oz., 15 oz., and 24 oz. sizes • Maple Candy Gift Boxes, available in 2 oz. and 6 oz. sizes

  5. Ginny’s Vermont Treats • Has lined up suppliers for maple syrup, jars, and labels for the Syrup product line, and confection mix and packaging for the Candy Gift Box product line • Plans to use local labor for product processing and packaging • She has supplier cost quotes, and her own time and motion studies for labor time requirement to fill/package product.

  6. Standard Cost • An estimated or predetermined cost of performing an operation or producing a good or service, under normal conditions.

  7. Standard Cost • Standard costs are used as target costs (or basis for comparison with the actual costs), and are developed from historical data analysis or from time and motion studies.

  8. Standard Costs: 6 oz. Gift Box • Mix: $4 • Packaging: $1 • Labor: $1 • Total: $6

  9. GVT Costs—Syrup Line • Maple syrup (bulk): $319 (5 gallon drum) • Jars: 8 oz: $.76 15 oz: $.82 24 oz: $.94 • Labels: $.022 • Labor (time requirement) for Syrup (per jar): 8 oz: .85 minutes 15 oz: 1 minute 24 oz: 1.2 minutes • Labor Costs: $10/hr (standard). $15/hr (OT)

  10. GVT Costs—Syrup Line • We know from experience that we “waste” about 10% of all syrup due to spillage, run off, etc. Further, experience shows us that 3% of all jars get scrapped, and 5% of labels have to be scrapped. • The cost of “waste” materials have to be factored in to the standard product cost.

  11. GVT Costs—Candy Gift Box Line • Confection mix: $113 (10 lb. sack) • Packaging: 2 oz box: $.82 6 oz box: $1.48 • Labor (time requirement) for Gift Box Line (per box): 2 oz box: 2.5 minutes 6 oz: 5.0 minutes • Labor Costs: $10/hr (standard). $15/hr (OT)

  12. GVT Costs—Candy Gift Box Line • Experience tells us we have these scrap levels for the Candy line: • 6% confection mix • 2% packaging

  13. What are the Standard Costs? • 8 oz Syrup: ? • 15 oz Syrup: ? • 24 oz Syrup: ? • 2 oz Candy Gift Box: ? • 6 oz Candy Gift Box: ?

  14. What are the Standard Costs? • There is a tab on the Accounting Exercises Excel file with all these numbers.

  15. Standard Cost Exercise Answers • You’ll just have to come to class October 14!

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