Managerial Accounting The Given Information And Questions Are Attached

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Mini Case S – Standard Costing
Raw Material
Harvest Sky Pie Company has a reputation for the best apple pies in Bruce county and
7,550 kg
6.325 kg
surrounding areas. Stacy started the company five years ago, baking pies at home, and has
Brown sugar
10 kg
5 kg
615 kg
experienced wonderful success and growth ever since. The company now has three retail outlets
35 kg
45 kg
195 kg
located in Meaford. Chatsworth, and Owen Sound, where the pies are sold for $16 along with a
8 kg
5 ks
138 kg
selection of vegetables and fruits brought for sale by area farmers. In anticipation of continued
growth, Stacy decided to no longer do all of the baking herself and has hired two people (Mike
and Tom) to help. She has an undergraduate degree in accounting and understands the benefits of
Stacy is very happy with her new hires. Mike brought an apple pie to the hiring interview with
standard costing. Knowing that it would be much more difficult to manage the baking of pies and
Stacy to have her sample the product of his family pie recipe. Mike, beaming with pride, told
related costs as a result of having employees involved, Stacy implemented a standard costing
Stacy that this recipe has won many awards at fall fairs over many years. Stacy tasted the pie and
system. The standard costs are updated monthly.
found it extremely sweet, having in her opinion far too much brown sugar. Over the month of
July, Stacy thought she had noticed that the pies prepared by Mike were the first to sell out each
The standard cost sheet used for July production (previous month) of pies follows:
day and was surprised to find that pie sales were more than 200 units higher than in June.
0.72 kg
1. Stacy’s goal is to maintain a minimum net profit of 20% on the apple pies. Calculate the
Brown sugar
0.18 kg
standard cost per pie and determine whether the current standard cost of the apple pie will
0.11 kg
generate the required net profit.
0.30 kg
Stacy has set a control limit of plus or minus $10 on each of the raw material inputs, for both
the individual price and usage variances. Calculate the price and usage variances for each
Direct labour
0.80 hrs
raw material, and determine which variances should be further investigated. (Ignore labour
*Variable overhead
0.25 hrs
and overhead variances for this question).
*Fixed overhead
0.15 hrs
3. Based on your variance analysis above, could the variances have any connection to Mike or
one of the two new hires?
*Based on direct labour hours.
During July, Harvest Sky Pie Company had the following actual production activity:
Actual production of pies
Brown sugar was purchased at (per kg)
Dough was purchased at (per kg)
Oatmeal was purchased at (per kg)
Direct labour:
Direct labour hours total cost
Direct labour hours used
Stacy estimates practical activity to be 1,900 units per month. Apples are purchased only twice
per year, in March and in October. The other ingredients are purchased throughout each month.
Inventory data regarding raw materials for July is provided below.Managerial Accounting