G.G. Cookies Case Study Help
Introduction
Nestled in Hopkinsville, Kentucky, G.G. Cookies emerges as a specialty cookie enterprise with a singular vision: to delight taste buds with their luscious Deluxe Chocolate Chip Cookies adorned with tantalizing Chunks of Chocolate. This case explores the genesis and strategic pathways of
G.G. Cookies as it navigates the intricate landscape of product costing methodologies, pricing strategies, and market positioning. Witness the inception of a cookie empire driven by a fervor for quality, flavor, and the pursuit of becoming a standout player in the world of gourmet cookie creations.
Situational Analysis Part 1: Establishment of G.G. Cookies
Business Name & Location Business Name: G.G. Cookies
Location: 45 Third St Suite B, Hopkinsville, KY
Mission Statement
"At G.G. Cookies, our mission is to craft delectable, handcrafted specialty cookies that evoke joy and delight in every bite. We are committed to using premium ingredients, blending passion with expertise, and delivering an exceptional cookie experience to our customers. Our goal is to create moments of happiness and indulgence through our irresistible and meticulously prepared cookies."
Choice of Cookie
Type of Cookie: Deluxe Chocolate Chip Cookies with Chunks of Chocolate
G.G. Cookies embarks on a flavorful journey in the heart of Hopkinsville, Kentucky. With an unwavering commitment to quality and taste, G.G. Cookies sets its sights on producing the finest
Deluxe Chocolate Chip Cookies, each infused with generous Chunks of Chocolate. The business operates from 45 Third St Suite B, dedicated to handcrafting gourmet cookies that redefine indulgence and create lasting memories.
Quantitative Analysis and Pricing Evaluation
G.G. Cookies Job Order Cost Sheet
| Job Number : 001 | |
| Direct Material
Ingredients Total cost per ingredient |
|
| List 5 ingredients and their costs | |
| Flour | $ 50 |
| Sugar | $ 30 |
| Chocolate Chips | $ 80 |
| Vanilla Extract | $ 20 |
| Butter | $ 70 |
| Total Direct Material Cost | $ 250 |
|
Date |
Direct Labor
Hours Rate |
Total cost per employee |
||
| (Employees) | ||||
| 1/1/2023 | $ 16 | $ 15 | $ | 240 |
| 1/2/2023 | $ 16 | $ 15 | $ | 240 |
| Total Direct Labor Cost | $ | 480 | ||
| Manufacturing Overhead
(30% of Direct labour cost) |
Total Cost |
||
| Total Direct Labor Cost | $ | 480 | |
| (30% of Direct labour cost) | 30% | ||
| Manufacturing Overhead | $ | 144 | |
| Total Manufacturing Overhead Cost | $ | 144 | |
| Cost Summary | ||
| Direct Materials | $ | 250 |
| Direct labor | $ | 480 |
| Manufacturing Overhead | $ | 144 |
| Total Cost | $ | 874 |
| Units | $ | 1,000 |
| Cost per Unit | $ | 0.874 |
| Process Costing Sheet | ||||||
|
Department: |
G.G. Cookies Production Cost Report
(Mixing Department) |
|||||
|
Cost: Beginning WIP Cost Incurred |
Material $ - $ 250 |
Labor $ - $ 480 |
Overhead $ - $ 144 |
Trans In Total |
||
| Total | $ 250 | $ 480 | $ 144 | $ 874 | ||
|
Units: Units Completed Equvilant Units Ending WIP |
$ 1,000 $ - |
|||||
| Total | $ 1,000 | |||||
| Cost Per Equivalent Units | $ | 0.874 | ||||
Explanation of Sales Price Estimation:
Based on the calculated cost per cookie using job order costing methodologies, G.G. Cookies would consider setting a sales price per cookie above the total cost per cookie to ensure profitability. A suggested sales price range per cookie could be between $1.00 to $1.10. (van Loon, 2020)
By setting the sales price slightly higher than the total cost per cookie, G.G. Cookies aims to cover not only the production costs but also additional expenses such as marketing, packaging, utilities, and generating a profit margin. This pricing strategy ensures that the company remains competitive while achieving profitability.
The detailed cost analysis helps G.G. Cookies in determining a reasonable sales price per cookie that aligns with market standards, product quality, and the company's profitability goals.
This strategic pricing approach ensures that G.G. Cookies can cover its production costs and generate profit while delivering value to customers through its premium Deluxe Chocolate Chip Cookies with Chunks of Chocolate.
Evaluation of Costing Methods:
Job Order Costing: Characteristics:
Customized Approach: Job order costing is ideal for businesses that produce unique products or services tailored to specific customer requirements. (Hilton, 2020)
Individual Cost Tracking: It tracks costs for each job or batch separately, allowing for precise cost allocation to specific units produced.
Varied Cost Elements: Considers direct materials, direct labor, and overhead costs associated with a particular job or order.
Complexity: It involves detailed record-keeping for each job, which can be more time- consuming and intricate.
Usefulness for Managers:
Job order costing is beneficial when a company produces diverse products or services with unique requirements. It provides a granular view of costs associated with each job, aiding in pricing decisions, cost control, and assessing profitability for specific orders..........
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