Question

Choco Chocolata is a cookie company in Juarez, Mexico that produces and sells American-style chocolate chip cookies with extremely high quality and service. The owner would like to identify the various costs incurred during each year in order to plan and control the costs in the business. Chocolata's costs are the following (in thousands of pesos): Utilities for the bakery $ 2,100 Paper used in packaging product 180 Salaries and wages in the bakery 23,500 Cookie ingredients 43,500 Bakery labor fringe benefits 1,300 Administrative costs 2,300 Bakery equipment maintenance 800 Depreciation of bakery plant and equipment 2,200 Uniforms for bakers 750 Insurance for the bakery 900 Rent for administration offices 18,500 Advertising 3,500 Boxes, bags, and cups used in the bakery 1,100 Office Manager's salary 13,000 Overtime premiums 2,600 Idle Time 500 Required (you may scan/email your supporting documentation for your answers but put final answers in box below): (1) What is the total amount of product costs

Answer 1

Answer:

(1) The total amount of product costs is $79,430.

(2) The total amount of period costs is $37,300.

Explanation:

Note: There are two requirements in this question as follows:

(1) What is the total amount of product costs?

(2) What is the total amount of period costs?

These two are answered as follows:

(1) What is the total amount of product costs?

Product cost can be described as the expenses that are incurred in order to produce a product. These types of expenses are charged to cost of goods sold and include direct materials, direct labor, factory overhead, and consumable production supplies.

Therefore, the total amount of product costs of Choco Chocolata can be calculated as follows:

Choco Chocolata

Computation of Total Product Costs

Details                                                                     Amount ($)  

Utilities for the bakery                                                  2,100

Paper used in packaging product                                  180

Salaries and wages in the bakery                            23,500

Cookie ingredients                                                    43,500

Bakery labor fringe benefits                                        1,300

Bakery equipment maintenance                                   800

Depreciation of bakery plant and equipment           2,200

Uniforms for bakers                                                        750

Insurance for the bakery                                                900

Boxes, bags, and cups used in the bakery                 1,100

Overtime premiums                                                     2,600

Idle Time                                                                          500  

Total                                                                             79,430  

Therefore, the total amount of product costs is $79,430.

(2) What is the total amount of period costs?

Period costs are costs that are related to passage of time but cannot not be charged to the cost of goods sold.

Therefore, the total amount of period costs of Choco Chocolata can be calculated as follows:

Choco Chocolata

Computation of Total Period Costs

Details                                               Amount ($)  

Administrative costs                             2,300

Rent for administration offices            18,500

Advertising                                            3,500

Office Manager's salary                      13,000  

Total                                                      37,300  

Therefore, the total amount of period costs is $37,300.