RealFood of chocolate bars at Realfood. It is

RealFood presents the general feeling of the complexity of manufacturing processes when it comes to tracking each cost from start to end. Product costs are those expenses that are crucial and used in manufacture of chocolate bars at Realfood. It is the total summation of direct material costs, manufacturing overhead costs and direct labor costs. Generally Accepted Accounting Principles does not provide direction on how to allocate costs, leaving the accountants to device their own ways to determine the best technique to use. Using the operational costing method discussed above, RealFoods can determine the necessary cost of a single chocolate bar and other product costs based on actual costs. RealFoods must define the materials it can trace directly to the chocolate bars like cocoa beans. Assume RealFoods uses $ 30,000 in raw materials and $10,000 in other production recipes like sugar and milk, the total direct costs will be $ 40,000. Secondly, it is important to determine the direct labor costs for the 75% of workers at the manufacturing plant. These costs include payroll taxes, wages, health and workers compensation insurance and pension contributions. RealFoods part-time accountant would add these costs to determine the total labor costs. Thirdly, manufacturing overhead costs must also be determined. These are costs that are necessary in manufacturing chocolate but cannot be traced directly to a particular bar. They may include the maintenance team, indirect labor costs, rent, property taxes and utilities. It should be noted that under operational costing method, this costs will fall under job or processes costing schedule. Finally, take these totals and divide by the number of chocolate bars that the company will have produced for the same period under analysis (Horngren, Sundem, Stratton, Burgstahler, & Schatzberg, 2002).

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