weekly direct labor 1100 Assuming owners personal expend

Tapiocas per week Sale Price Beverages per week Sale Price Indirect Costs per Week
Chicken 150 R$ 6.00 Coffe 200 R$ 2.00 Lease
Ham 250 R$ 6.00 Milk 120 R$ 2.00 Parking fee
Tomato 100 R$ 6.00 total 320 Taxes
Total 500 Fuel Truck
Fuel Car
Accountant
Cooking gas

Compute the unit cost for the coffee using the absorption costing system and using
as the allocation base for indirect costs the number of units produced. Mind that
both the coffee and the chocolate milk are always sweetened with sugar. (1 point).

Sugar used per beverage (assuming amount per unit is the same and all sugar is used in beverages)

Beverages per week Sugar use

Coffe 200 6.25 25.625
Milk 120 3.75
total 320 10

Water used per beverage (assuming amount per unit is the same and all Water is used in beverages)

Beverages per week Water use

Coffe 200 12.5
Milk 120 7.5
total 320 20

Cups used (assuming all cups are used in beverages)

Beverages per week Cups used

Coffe 200 625 15.9375
Milk 120 375
total 320 1000
Computing Coffe unit cost

Direct Costs

Direct Materials
Water R$ 12.50
Coffe R$ 37.92
Sugar R$ 25.63
Cups R$ 15.94
total R$ 91.98

assuming that direct labor is also distributed between products based on number of units produced

Labor 268.2926829

Unit Cost for coffe

Total Direct costs R$ 360.28

Total Indirect costs R$ 75.61
Total costs R$ 435.88
Unit cost R$ 2.18
owners personal expenditures as period costs

osts per Week OH Rate Type of cost Direct Materials per Week
R$ 250.00 R$ 0.30 Product Cost Ingredient (kilograms R$ (total)
R$ 50.00 Period Cost Coffee 2 kg R$ 37.92
R$ 14.25 Period Cost Butter 1 kg R$ 25.80
R$ 60.00 R$ 0.07 Product cost Water 20 liters R$ 20.00
R$ 60.00 Period cost Cheese 16 kg R$ 238.39
R$ 137.50 Period Cost Chicken 10 kg R$ 88.90
R$ 75.00 R$ 0.15 Product Cost variable Ham 7 kg R$ 78.80
Disposable 1000 units R$ 25.50
Sugar 10 kg R$ 41.00
Cocoa pow 2,4 kg R$ 19.80
Cream che 3,75 kg R$ 36.76
Granulated 50 kg R$ 140.00
Tomato 1,5 kg R$ 8.84
Milk 24 liters R$ 120.00
R$ Unit
18.96
25.8
1
14.89938
8.89
11.25714
0.0255
4.1
8.25
9.802667
2.8
5.893333
5
Consider that Junior wants a gross margin (over net sales) of 60%, and the unit cost
of the tapioca is R$2,98. What would your price suggestion for this product be?
Explain in detail your computations to make sure he will understand the rationale
behind the number (otherwise, he will not use your ideas as a consultant and your
service will be of no value).

gross profit margin is calculated by dividing gross profit by sales revenue, and sales revenue is calculated
by multiplying unit price by number of units sold. Therefore, to define unit selling price by gross profit
margin we must do the following: ((selling price X units sold) - Total cost)/(selling price X units sold). For
this example this should equal 60%. Transforming this formula to calculate selling price we get that selling
price is equal to (total costs/0,4)/units sold. lets apply those calculations below.

Number of units sold 500

Selling price (per unit) $7.45
Sales $3,725
Total cost 1,490
Gross profit 2,235
Gross profit margin (o 60.00%
You have explained to Junior all the advantages of using the marginal costing
system besides the absorption costing system (i.e., costing system the company is
legally required to follow). Now, Junior wants you to show him the operating profit
of the tapiocaria considering each costing system (i.e., comparison between the
absorption and the marginal costing). Explain the numeric differences between each
costing system line by line of the income statement

butter use per tapioca type, assuming equal use per unit Tapioca use per tapioca type, assumin

Tapiocas per week Butter use kg In R$ Tapiocas per week

Chicken 150 0.3 7.74 Chicken
Ham 250 0.5 12.9 Ham
Tomato 100 0.2 5.16 Tomato
Total 500 1 25.8 Total

cheese use per tapioca type, assuming equal use per unit

Tapiocas per week cheese use Kg In R$

Ham 250 11.4285714285714 170.27857143
Tomato 100 4.57142857142857 68.111428571
Total 350 16 238.39

MARGINAL COSTING

DIRECT PRODUCT COSTS Coffe Milk Chicken Ham

Direct Materials R$ 91.98 R$ 172.24 R$ 175.40 R$ 331.98
Labor R$ 268.29 R$ 160.98 R$ 201.22 R$ 335.37
total direct costs R$ 360.28 R$ 333.21 R$ 376.62 R$ 667.34
INDIRECT PRODUCT COSTS
LEASE R$ 60.98 R$ 36.59 R$ 45.73 R$ 76.22
FUEL TRUCK R$ 14.63 R$ 8.78 R$ 10.98 R$ 18.29
COOKING GAS R$ 22.50 R$ 37.50
 total indirect R$ 75.61 R$ 45.37 R$ 79.21 R$ 132.01

TOTAL COSTS R$ 91.98 R$ 172.24 R$ 197.90 R$ 369.48

UNIT COST R$ 0.46 R$ 1.44 R$ 1.32 R$ 1.48

Income statementCoffe Milk Chicken Ham Cheese Total

Net revenu R$ 400 R$ 240 R$ 900 R$ 1,500 R$ 600 R$ 3,640
COGS R$ 92 R$ 172 R$ 198 R$ 369 R$ 125 R$ 957
Gross profi R$ 308 R$ 68 R$ 702 R$ 1,131 R$ 475 R$ 2,683
Op expenses
Parking fee 50
Taxes 14.25
Fuel Car 60
Accountant 137.5
labor R$ 1,100
Lease 250
Fuel Truck 60
operating profit R$ 1,012
 weekly direct labor 1100

Tapiocas per week Sale Price Beverages per week

Chicken 150 6 Coffe 200
Ham 250 6 Milk 120
Tomato 100 6 total 320
Total 500

pioca use per tapioca type, assuming equal use per unit

piocas per week Tapioca use Kg In R$

150 15 42
250 25 70
100 10 28
500 50 140

Tomato total
R$ 110.11 R$ 881.71
R$ 134.15 R$ 1,100.00
R$ 244.26 R$ 1,981.71

R$ 30.49 R$ 250.00
R$ 7.32 R$ 60.00
R$ 15.00 R$ 75.00
R$ 52.80 R$ 385.00

R$ 125.11 R$ 956.71
R$ 1.25 R$ 5.94
 Assuming owners personal expenditures as period costs

Sale Price Indirect Costs per Week OH Rate Type of cost

2 Lease 250 0.3048780488 Product Cost
2 Parking fee 50 Period Cost
Taxes 14.25 Period Cost
Fuel Truck 60 0.0731707317 Product cost
Fuel Car 60 Period cost
Accountant 137.5 Period Cost
Cooking gas 75 0.15 Product Cost

ABSORPTION COSTING

DIRECT PRODUCT COSTS Coffe Milk Chicken

Direct Materials R$ 91.98 R$ 172.24 R$ 175.40
Labor R$ 268.29 R$ 160.98 R$ 201.22
total direct costs R$ 360.28 R$ 333.21 R$ 376.62
INDIRECT PRODUCT COSTS
LEASE R$ 60.98 R$ 36.59 R$ 45.73
FUEL TRUCK R$ 14.63 R$ 8.78 R$ 10.98
COOKING GAS R$ 22.50
 Total indirect R$ 75.61 R$ 45.37 R$ 79.21

TOTAL COSTS R$ 435.88 R$ 378.58 R$ 455.83

UNIT COST R$ 2.18 R$ 3.15 R$ 3.04

Income statementCoffe Milk Chicken Ham Tomato Total

Net revenu R$ 400 R$ 240 R$ 900 R$ 1,500 R$ 600 R$ 3,640
COGS R$ 436 R$ 379 R$ 456 R$ 799 R$ 297 R$ 2,367
Gross profi -R$ 36 -R$ 139 R$ 444 R$ 701 R$ 303 R$ 1,273
Op expenses
Parking fee 50
Taxes 14.25
Fuel Car 60
Accountant 137.5
Operating Profit R$ 1,012
Direct Materials per Week Beverages per week Sugar use
Ingredients To (kilograms/unitR$ (total) R$ Unit Coffe 200 6.25
Coffee 2 kg 37.92 18.96 Milk 120 3.75
Butter 1 kg 25.8 25.8 total 320 10
Water 20 liters 20 1
Cheese 16 kg 238.39 14.89938 Beverages per week Water use
Chicken 10 kg 88.9 8.89 Coffe 200 12.5
Ham 7 kg 78.8 11.25714 Milk 120 7.5
Disposable plas 1000 units 25.5 0.0255 total 320 20
Sugar 10 kg 41 4.1
Cocoa powder 2,4 kg 19.8 8.25 Beverages per week Cups used
Cream cheese 3,75 kg 36.76 9.802667 Coffe 200 625
Granulated tap 50 kg 140 2.8 Milk 120 375
Tomato 1,5 kg 8.84 5.893333 total 320 1000
Milk 24 liters 120 5

Ham Tomato total

R$ 331.98 R$ 110.11 R$ 881.71
R$ 335.37 R$ 134.15 R$ 1,100.00 As we can see, the calculations of costs remain the same for both met
difference resides within how do we allocate this costs. While absor
R$ 667.34 R$ 244.26 R$ 1,981.71 consider both variable and fixed costs as COGS, marginal costing on
products the variable costs, considering the remaining costs as perio
R$ 76.22 R$ 30.49 R$ 250.00
R$ 18.29 R$ 7.32 R$ 60.00
R$ 37.50 R$ 15.00 R$ 75.00
R$ 132.01 R$ 52.80 R$ 385.00

R$ 799.36 R$ 297.06 R$ 2,366.71

R$ 3.20 R$ 2.97 R$ 14.54

The region were both methods really differ is on gross profit calculation.
Since COGS for marginal costing consider less cost sources we see that
COGS for marginal costing are smaller which in turn inflates gross profit. In
the other hand, operating expenses are clearly bigger. Althought
computations follow different logics for each method the final result must
remain the same since both methods apply all the costs at some point.
emain the same for both methods. The real
ocate this costs. While absorption costing
as COGS, marginal costing only apllies to
g the remaining costs as period expenses.
oss profit calculation.
sources we see that
nflates gross profit. In
bigger. Althought
d the final result must
costs at some point.
 Food Truck Le
Junior is worried about the Covid-19 situation and how the pandemic Own
will impact
his business. In this sense, he wants your help to calculate how many
units of each
product the company need to sell, at least, to cover all the fixed
expenditures. In Ga
addition, show to Junior how many surplus units Junior is selling
compared to the
minimum required sales level (i.e., margin of safety).

Quantity 200 120

Coffee Chocolate
Cooking Gas R$ - R$ -
Coffee R$ 37.92 R$ -
Butter R$ - R$ -
Water R$ 12.50 R$ 7.50
Cheese R$ - R$ -
Chicken R$ - R$ -
Ham R$ - R$ -
Disposable plastic cups R$ 15.94 R$ 9.56
Sugar R$ 25.62 R$ 15.37
Cocoa powder R$ - R$ 19.80
Cream cheese R$ - R$ -
Granulated tapioca R$ - R$ -
Tomato R$ - R$ -
Milk R$ - R$ 120.00
Variable Cost R$ 91.98 R$ 172.24
Variable Cost per Unite R$ 0.46 R$ 1.44

Contribution margin per unite

Coffe chocolate
sale price per unit 2 2
Variable unite cost 0.46 1.44
Unit CM 1.54 0.56
CM rank 4 5

Production to cover for fixed cost acording to CM rank Units

Cheese and Tomato 600.00 100
Chicken and Cream Cheese 900 150
Ham and Cheese 172 29
total 1672.00 279
Cover fixed cost
CM 308.0175 67.7625
Revenue 400 240
CM ratio
Break even in $
Margin of safety

Production to cover for all costs units

Cheese and Tomato R$ 600.00 100
Chicken and Cream Cheese R$ 900.00 150
Ham and Cheese R$ 1,134.00 189
total revenue R$ 2,634.00 439
Total costs R$ 2,628.46

Surplus units produced

Ham and Cheese 61
Coffe 200
Chocolate 120
 Food Truck Lease and Related Expenditures
w the pandemic Owner’s Car Parking Fee
ate how many MEI Taxes
the fixed Accountant Fee
Gas for Owner’s Car
r is selling
Truck Gas
Direct Labor
Total fixed Costs

150 250 100 500

Tapiocas
Chicken and Cream Cheese Ham and Cheese Cheese and Tomato
22.5 37.5 15
R$ - R$ - R$ -
R$ 7.74 R$ 12.90 R$ 5.16
R$ - R$ - R$ -
R$ - R$ 170.28 R$ 68.11
R$ 88.90 R$ - R$ -
R$ - R$ 78.80 R$ -
R$ - R$ - R$ -
R$ - R$ - R$ -
R$ - R$ - R$ -
R$ 36.76 R$ - R$ -
R$ 42.00 R$ 70.00 R$ 28.00
R$ - R$ - R$ 8.84
R$ - R$ - R$ -
R$ 197.90 R$ 369.48 R$ 125.11
R$ 1.32 R$ 1.48 R$ 1.25

Tapioca
Chicken and Cream Cheese Ham and Cheese Cheese and Tomato
6 6 6
1.32 1.48 1.25
4.68 4.52 4.75
2 3 1
 Total
702.1 1130.5214285714 474.888571428572 2683.29
900 1500 600 3640
0.7371675824
2268
1372.20
R$ 250.00 week
R$ 50.00 week
14.25 week
R$ 137.50 week
R$ 60.00 week
R$ 60.00 week
R$ 1,100.00 week
R$ 1,671.75 week
Tapiocas chicken ham and cheese
Unites 150 250
sales price p/unite R$ 6.00 R$ 6.00

Drinks cofees chocolate milk

Unites 200 120
sales price p/unite R$ 2.00 R$ 2.00

New sales
Tapiocas chicken ham and cheese
Unites 75 125

Drinks cofees chocolate milk

Unites 100 60

Food Truck Lease and Related Expenditures

Owner’s Car Parking Fee
MEI Taxes
Accountant Fee
Gas for Owner’s Car
Truck Gas
Direct Labor
Total fixed Costs

Quantity 200 120

Coffee Chocolate
Cooking Gas R$ - R$ -
Coffee R$ 37.92 R$ -
Butter R$ - R$ -
Water R$ 12.50 R$ 7.50
Cheese R$ - R$ -
Chicken R$ - R$ -
Ham R$ - R$ -
Disposable plastic cups R$ 15.94 R$ 9.56
Sugar R$ 25.62 R$ 15.37
Cocoa powder R$ - R$ 19.80
Cream cheese R$ - R$ -
Granulated tapioca R$ - R$ -
Tomato R$ - R$ -
Milk R$ - R$ 120.00
Variable Cost R$ 91.98 R$ 172.24

Pre- Pandemic
Chocolate Cofee
Revenue R$ 240.00 R$ 400.00
Variable Costs R$ 172.24 R$ 91.98
CM R$ 67.76 R$ 308.02
Fixed costs
Operating profit
 cheese and tomato total
100 500
Still very worried, Junior asks you: “if the company sa
R$ 6.00 units sold) from the pre-pandemic level, how much is
amounts) on the operating profit? How much is the o
tapiocaria in this drop-in-sales situation?” Explain you
needs solutions well-developed.

cheese and tomato total

50 250

and Related Expenditures R$ 250.00 week

Car Parking Fee R$ 50.00 week
MEI Taxes 14.25 week
ountant Fee R$ 137.50 week
or Owner’s Car R$ 60.00 week
Truck Gas R$ 60.00 week
irect Labor R$ 1,100.00 week
osts R$ 1,671.75 week

150 250 100 500

Tapiocas
Chicken and Cream Cheese Ham and Cheese Cheese and Tomato
22.5 37.5 15
R$ - R$ - R$ -
R$ 7.74 R$ 12.90 R$ 5.16
R$ - R$ - R$ -
R$ - R$ 170.28 R$ 68.11
R$ 88.90 R$ - R$ -
R$ - R$ 78.80 R$ -
R$ - R$ - R$ -
R$ - R$ - R$ -
R$ - R$ - R$ -
R$ 36.76 R$ - R$ -
R$ 42.00 R$ 70.00 R$ 28.00
R$ - R$ - R$ 8.84
R$ - R$ - R$ -
R$ 197.90 R$ 369.48 R$ 125.11

Tapioca
Chicken and Cream Cheese Ham and Cheese Cheese and Tomato Total
R$ 900.00 R$ 1,500.00 R$ 600.00 R$ 3,640.00
R$ 197.90 R$ 369.48 R$ 125.11 R$ 956.71
R$ 702.10 R$ 1,130.52 R$ 474.89 R$ 2,683.29
-R$ 1,671.75
R$ 1,011.54
 rried, Junior asks you: “if the company sales drop 50% (in number of
rom the pre-pandemic level, how much is the impact (in percentage
n the operating profit? How much is the operating risk degree for the
n this drop-in-sales situation?” Explain your computations since Junior
ons well-developed.
divide Revenue and Variable cost by 2
Fall of 50%
Chocolate Cofee
Revenue R$ 120.00 R$ 200.00
Variable Costs R$ 86.12 R$ 45.99
CM R$ 33.88 R$ 154.01
Fixed costs
Operating profit
Percentage change in profit
Percentage change in Sales
operating risk degree
Tapioca
Chicken and Cream Cheese Ham and Cheese Cheese and Tomato Total
R$ 450.00 R$ 750.00 R$ 300.00 R$ 1,820.00
R$ 98.95 R$ 184.74 R$ 62.56 R$ 478.35
R$ 351.05 R$ 565.26 R$ 237.44 R$ 1,341.65
-R$ 1,671.75
-R$ 330.10
-133%
-50%
265%
 Suppose the company is at the beginning of March 2020. Junior was watching the news and just has discovered that all gym
Paulo. He knows that he will spend some time without having any new sales, so the business will need to survive only with the
tapiocaria has 20% of sales in cash, 30% from meal tickets (“vale-refeição”, which pays the tapiocaria 30 days after the mon
tapiocaria 60 days after the month has ended), and the remaining value is uncollectible. How much money does the com

Assuming revenue from the previous months is constant and equal to what was calculated previously

Collections in the month

revenue R$ 14,560.00 R$ 14,560.00

Jan Feb Mar
cash sales R$ 2,912.00 R$ 2,912.00 R$ -
meal tickes R$ 4,368.00 R$ 4,368.00 R$ 4,368.00
Account collections R$ 6,552.00 R$ 6,552.00 R$ 6,552.00
total R$ 13,832.00 R$ 13,832.00 R$ 10,920.00 Total amount Tapiocaria can collect in march
 Income st Coffe
Net revenu 400
COGS 435.8849
Gross profi-35.88494
Op expenses
s discovered that all gyms are going to close due to the social isolation decree in São Parking fee
to survive only with the accounts receivable from previous months. Consider that the
ia 30 days after the month has ended), 45% on account (credit card, which pays the Taxes
ch money does the company still have to be collected at the beginning of March? Fuel Car
Accountant
Operating Profit

aria can collect in march

chocolate Chicken Ham Tomato Total
240 900 1500 600 3640
378.579 455.8268 799.3566 297.0626 2366.71
-138.579 444.1732 700.6434 302.9374 1273.29

50
14.25
60
137.5
1011.54