Problem: Industrial Cost Analysis

Directions: Answer each question, show the formulas used, and show all your work. The scenario describe here applies throughout the exam.

As part of our IIE Southeast Regional conference, we need to have centerpieces made for the table for both dinners. The center pieces will be "cookie bouquets". (Cookie bouquets are flowers made from cookies to look like a bouquet). The company that will be used employs several bakers as part of their workforce.

The year consists of 52 40-hour weeks. Seasonally there is overtime during certain holiday periods: Valentines, Easter, Mother's Day, Thanksgiving and Christmas. During those periods there is additional hours equivalent to 2 Saturdays for each holiday before the holiday occurs (or in other words not during the holiday week). In addition, these bakers are required .to work on the actual holiday (5 days) at a rate of double time to compensate for working the holiday. The bakers are also paid on an incentive basis as part of a profit sharing agreement with management. Annually this results in an additional 15% of pay on their weekly rate when actually present at work. The Paid-Time-Off that each baker is given is an equivalent of 3 weeks annually. Non-hourly costs include Social Security and Medicare; Workers compensation for 2.1% with no maximum; Medical Insurance for $385 monthly, Unemployment insurance of $700 annually; an allowance for uniforms of 1 uniform per quarter at a cost of $50.00 each. The base hourly rate is $26.50. Overtime is paid at time and a half unless otherwise indicated.

1. We are interested in finding the estimated direct labor cost for a Baker.

a. What is the Annual Labor cost for a Baker?

b. What is the effective gross hourly cost?

The scenario continues:

Suppose you have just have been awarded the contract to make the cookie bouquets for the conference. You need to make cookie bouquets for the Friday night dinner and the Saturday night dinner.

Friday night dinner will consist of 240 people. Each table will have 10 people seated at the table and there will be 2 Serving Tables and a Check-in Table. Each seated table will have a bouquet with 10 cookies in the bouquet. The Serving Tables will 2 bouquets each with 8 cookies each and the Check-in Table will have one bouquet with 6 cookies in it.

Saturday night dinner will consist of 250 people. Each table will have 8 people seated at the table and there will be a check in table. Each seated table will have a bouquet with 8 cookies in the bouquet. The Checki-in Table will have one bouquet with 6 cookies in it.

The productivity standard for cookie bouquets is approximately 8 minutes per cookie. This includes mixing, baking and assembling the bouquet. In addition, you can only start making the cookie 3 days in advance or they will be stale. Assume you have 3 - 8 hour days to complete the order. The historical nonproductive time is 15%. Assume a 5% scrap rate on the cookies because of breakage.

2. How many productive, non-productive and paid FTE's (bakers) will be needed to produce these bouquets?

3. What is the total labor cost?

The cookie dough is bought in pre-made frozen sheets of cookie dough measuring 20 x 20 inches. The cookies are cut using a 3inch diameter cookie cutter. The excess dough is not reused but rather thrown out. Each cookie is then decorated with icing and "decorating sugars". After decorated they are wrapped in a cellophane sleeve and assembled into the bouquets. The dough is purchased in cases of 12 sheets of 20 x 20 at a cost of $43.50 a case. Each cookie uses approximately 1/2 oz. of frosting and .02 oz. of decorating sugars. Frosting is bought in 24 oz. decorating tubes at a cost of $10.25 a tube. The decorating sugars come in 5 oz jars at a cost of $5.50 a jar. The cellophane wrappers come in boxes of 144 "sleeves" at $24.00. Each bouquet is placed in a "planter" box and the planter boxes are sold by the dozen for a cost of $72.00 a case. Below is an example of a cookie bouquet.

4. What is the total material cost for the bouquets?

5 . What is the waste generated from the cookie dough? The cookie dough waste should be
calculated in in2. What is the shape yield?

6. What is the total cost to produce the bouquets for the event?

7. What is the total cost per dinner (not person) and per bouquet size (10, 8, 6 cookies)? Use a cost per cookie when determining the unit costs.