Final Proyect Arepas Colombianas

7/28/2019 Final Proyect Arepas Colombianas

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Title: Project Arepas Colombianas

Colombian Pones

Final Presentation

Submitted to the

Faculty of Ana G. Mendez

Carlos Ramos

In partial fulfillment of

the requirements of the

Managerial Accounting

By

Edwin Alexander Gomez A.

Miriam Macias

Jenifer Padilla


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Ana G Mendez University System

Orlando, Florida

April, 2010

Professor Approval:

______________________________

Abstract

In moments of crisis only creativity is more important than knowledge.

Albert Einstein

Once you have identified an attractive target, move towards him is nice, and not doing so is

uncomfortable.

Stephen Covey

In general, people decide to change course in difficult times. When all is well, just talk about

change.

Po Bronson


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Introduction

Arepas Colombianas or Colombian Pones, by his name in English, its a familiar project,

that start in February of 2010, due the actual economic crisis in the United States by

unemployment, and the need to cover the debs, bills and family expenses but also, the principal

factor to be independent and do not continue with the routine paycheck to paycheck, like the

most of the immigrants of the United States.

Through of this work, it seeks to apply the knowledge gained in the field of managerial

accounting in real life, as cost management, budgets and prices, with a company that until now

begins, and may be the factor more relevant of the firm to acquire strength and stability over

time, and which is also begins to be profitable.

Colombian pones with cheese, whose mass is enriched with the addition of milk, butter and

sugar well kneaded with warm water and have as its key feature that puts the cheese before

baking, when they are making the disks or wheels mass. The pone is a cake dough or cornmeal

circular and semi-flattened usually grilled or fried cuisine. It is food used to be eaten as a main

dish or as a companion, alone or stuffed, often as part of breakfast, lunch or dinner. It is a

traditional dish of Colombian, Venezuelan and Panamanian cuisines. Has achieved a significant

spread in the Canary Islands following the return of immigrants from Venezuela. The pone is

called a tortilla in Panama for influence in Central America, is linked to the tortilla and

Salvadoran pupusas.


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Background

The academic and historical essays on the culture of Latin America, Mariano Picn Salas,

spoke about the origin of the pone as follows: "The Caribs and Cumanagotos used both as the

ripe corn, the latter were served to prepare a kind of bread corn (the corn bread), according to

techniques that have been preserved to date (1953). The corn bread they called "erepa" as

elaborated by giving the mass round, imitating the sun god, paying tribute as divine food.

Thus, some locate the origin of the pone in what today is Venezuela, which explains the

importance that food means food in Venezuela, where it is assumed that spread to other regions

and countries, particularly neighboring Colombia, where he found great acceptance. After the

discovery of America by the chroniclers was learned that when Christopher Columbus arrived in

San Salvador (first played by Columbus on American soil, island in the Bahamas today, before

named Guanahani in 1492), the natives offered pones prepared from cassava and Mahis (Corn).

In addition, Fray Pedro Simon, in his News histories of the conquests of the mainland in the

West Indies, and Bernabe Cobo, History of the New World, wrote that the natives in America

made some cakes "as thick as a finger, which is called pones. From the nineteenth century in

Venezuela and Colombia, for each region and each family there is a formula for the pone, which

is very popular nowadays, regarded as an icon and very representative of the cuisine and culture

of Venezuela and Colombia. In Colombia, the pone is a recognized icon of the Colombian

cuisine today. The Colombian pones can be prepared with different types of corn, and get

different names, like Choclo or corn pone, prepared with tender sweet corn (corn that is called

choclo), white cornmeal, made from white corn flour or its pre-cooked , which is often

accompanied by cheese in or on the pone (corn bread with cheese), peeled corn pone typical of

the Santander, made with corn previously treated with ash or lime to remove the seed coat,


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yellow cornmeal, made with yellow corn flour, cornmeal fried, typical of the Caribbean Coast,

made with corn meal pre cooked white or yellow, can be with or without a little cheese, salt, then

fried, cornmeal or cornmeal egg yolks, which are fry a little, stuffed with an egg, and finally

finish frying; arepa paisa which is basically a white cornmeal, a little thinner, which is

prepared and served without salt, without filling to accompany the meal of corn bread mote

(Amerindian language word in Quechua means cooked corn); cornmeal boiled (boiled); arepa

with hogao; cornmeal wheat, cornmeal Boyaca, valley-and cornmeal arepas stuffed with cheese

or any kind of meats and vegetables. In Colombia is celebrated annually on Colombian Arepa

Festival in the five largest cities: Barranquilla, Bogota, Bucaramanga, Cali and Medellin. Under

the original schedule in each city take turns organizing the festival between the months of

August and December. Also prepared charcoal grilled arepas or grilled, sometimes over bijao

leaves that give a distinctive odor, which are filled with all kinds of meat (ground beef, try

strained, chicken, pork), cheese coast, meats (sausage , pepperoni, sausage), vegetables and

sauces. For many years the arepas were a food supplement of the native tribes in Latin America,

and through the years have become an essential part of the diet of Hispanic families.

The arepas are recognized in most countries of the Americas, but each has its traditional way

of preparation where the ingredients vary, the shape and size. Arepas can be made with white or

yellow corn, salt, cheese or sugar, may be big, small, thick or thin. The shape of the arepas and

the different ingredients that are produced depends on the region where it is consumed. The

arepa has become a perfect complement to meals thanks to its mild flavor can be eaten alone or

accompanied. There are many recipes and ways to eat and combine the arepas. The U.S. has an

excellent corn becoming one of the largest producers of corn in the world. The pones made from

the corn, are crunchy, delicious and nutritious. With the immigration of Hispanics and the


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popularity of Latin food arepas are rapidly reaching the American markets. One of the most

popular is the arepa with cheese, because you Americans have a love for cheese and corn.


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Managerial Accounting Analysis

The Colombian Pones Company, it is considered a self employment company, which begins

operations in February 25 of 2010, in the family house. Some items used in the managerial

accounting in companies at big scale, are not used here, because is a very small company, and

that items are not a relevant costs to make the analysis in this project. The Inventory system used

are a FIFO system, due it is a perishable product and his consumption will be daily, because the

production do not use preservatives. The raw materials inventory it is also very small, because

the sales daily are very variable and just started with trials and do not have at is time a specific

brand of each direct material. All information provided is based on the work carried out during

these few weeks and may omit relevant factors in making long term decisions, but is expected to

make an evaluation and a deeper financial analysis, once completed is to least one fiscal period a

year. Due the small size of operation, to purpose of this analysis, it is considered the process cost system,

because the company produce daily the same quantity of pones, do not the matter if all the production is

sold or not. Some days are short, some days left 4 or 5 pones, so it is by this aspect, and the company

considers an average of production and sales of fifty pones weekly.

The direct materials in the elaboration of the pones are:

Precooked white corn flour

Warm water

Warm milk

Sugar

Butter

Salt

Mozzarella cheese


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The presentation of the direct material are as follows, and with those units, gives a production

of 50 units that is the same weekly average production:

Precooked white corn flour Bag 5 lb $4.89

Mozzarella Cheese Bag 2 lb $7.29

Sugar Bag 4 lb $2.79

Salt at taste Bag 1 lb $0.79

Butter Bar 1 lb $0.69

Milk 1 gallon $2.79

Water 1 gallon $0.011

The direct labor are considered the same profit, due at this moment it is a self employment

company, and just expend a 2 hours in the direct manufacturing of the pones and is 1 hour in the

transport and delivery and 1 hour in sales.

In the production of the pones, is used the following Manufacturing Overhead in a daily

basis:

Indirect materials

Spray Canola Oil 0.2 can $0.67

Envelope 0.5 Yards $0.02



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Utilities

Water 1 Gallon $0.011

Electricity 60W/ hour $0.54

Transport 1 Gallon gas $2.57 Average

25 Miles

The depreciation costs are not take it in consideration at this moment, due the company just

started 6 weeks ago, and are nor a relevant cost in the purpose of this analysis. Direct labor is

equal to the profit, due is a self employment company. The time is a total of 3 hours daily. 2

hours in manufacturing and one in sales. To determine the overhead rate at this moment is

speculating, because until now, the statistics are being taken and are still assessing the costs of

direct materials, manufacturing overhead and at the actual production level, is hard determine if

the company will grow up in the middle or in the long term.

The company will consider the cost of direct materials only, to determine the price of sale, and it

was decided the use of the total cost of direct materials dividing the total number of units

produced to determine the cost per unit and thus, determine whether they could make a profit.

The development of this calculation is as shown below:

Arepas Colombianas

Determination of the cost per unitFebruary 25/2010 to March 04/2010

Total units 50

Direct materials


Mozzarella Cheese Bag 2 lb $7.29


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Milk 1 gallon $2.79


Indirect materials




Utilities



Transport* 1 Gallon gas $2.57 Average

Total Costs

$23.0

7

Cost per Unit $0.46*Depreciation are not considered

The total units produced in the week is the same that are sold in the week, because due the

nature of the product, the company cannot keep inventory of finished products, but can keep the

product in process for undefined periods of time, according the needs of the production and the

demand of the product. To compute the equivalent units, this measure will be made in a daily

basis, because every week start with a new process and at the end of that week, the final

inventory of products in process and finished product are zero. With the purpose to show the

equivalent units, it is show as follows:

Work in process units Feb 25/2010 0

Direct Materials 100% Complete

Conversion costs 24% Complete

Units started into production during this week 50


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Units complete and transferred out to baking 12

Work in process units end Feb 25/2010 38

Over the week, the products in process are decreasing with the purpose that at the end of the

week, the products in process will be zero. To make a complete analysis of the equivalent units,

it is take the next day as follows:

Work in process units Feb 26/2010 38

Direct Materials 100% Complete

Conversion costs 48% Complete

Units started into production during this week 50

Units complete and transferred out to baking today 12

Units completed and sold 12

Work in process units at end Feb 25/2010 26

Units accounted for completed, transferred out and sold Feb 26 24

Costs of direct materials 100% $23.07

Conversion Costs 48% Complete $11.075

Cost incurred during production at Feb 26 $11.075

Total Conversion Costs $22.15

Unit Conversion Costs $0.461


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Materials Conversion Costs

Units transferred out 24 24

Work in Process

50 * 100% 26

50 * 48 % 24

Total Equivalent Units 50 48

Now, it is show the unit production cost:

Total Material Costs $23.07

Equivalent Units of Materials 50

Unit material Cost $0.46

Cost of goods in process $11.073

Started into Production $11.075

Total Costs $22.148

Total manufacturing Cost per unit $0.921 (Unit Material Cost + Unit Conversion Cost)

Due the size of the company, it is not possible at this moment work with an Activity-Based

costing, because it is just one person doing all the activities, so the cost drivers are focus in one

person with many activities, and the values are very small go get a representative impact in the

determination of the cost and prices to sold.


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Now, to determine the Variable and the Fixed Costs, it is used the actual information over the

different weeks, plus some projections of production, with the purpose of illustrate the Cost

Volume Profit Analysis, Contribution Margin Analysis and Contribution Margin Ratio, Break-

Even Analysis, Relevant Costs and Flexible Budgets. It is used the High-Low method to

compute the variable and fixed costs, because all the weeks the company keep the same

production of 50 pones, and at the end of the week, the inventory is reduced to a small portion

of raw materials, but every day the production varies and not all days keep the same production,

although at the end of the week, keep the production at level of 50 units.

The Variable cost include all the direct materials, the fixed cost are the indirect materials, the

utilities and the transport, because no matter the level of production, always going to incur these

costs there will be a unit or fifty in a single day. In an operation of a 100%, the production by

hour is 12 units and the fixed cost keep at the level show above. Some days, the company

operates at 50% but not less, and tries all the days keep the level of production 75% to 100%. To

get the CVP analysis, it starts with the determination of the total cost per units, using the relevant

range and the actual level of production with a daily basis, with the purpose to illustrate the CVP

analysis.

Arepas ColombianasDetermination Relevant Range

March 04/2010

Operation at % # units Costs100 12 $5.52

Actual Operation 95 11.4 $5.2490 10.8 $4.97

Relevant range 85 10.2 $4.6980 9.6 $4.4275 9 $4.14


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70 8.4 $3.8665 7.8 $3.5960 7.2 $3.3155 6.6 $3.0450 6 $2.76

45 5.4 $2.48Cost per unit $0.46

With the objective to illustrate the use of the High-Low Method, it takes the information of

the dark blue area of the table shown above, but with a projection until one hundred units, by the

projection model, without taking the changes in the relevant range at the different levels of fixed

costs that will be shown more forward.

Arepas Colombianas

High-Low Method

February 25/2010 to March 04/2010

Production Based in Daily Sales

Units Costs Sales

Monday 12 $5.52

$12.0

0

Tuesday 7 $3.22 $6.00

Wednesday 11 $5.06

$11.0

0

Thursday 9 $4.14 $9.00

Friday 11 $5.06

$12.0

0

Total Week 50

$23.0

0

$50.0

0

High 12 $5.52

Low 7 $3.22

Selling Price x unit $1.00

Variable Cost $2.17


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Variable Cost x unit $0.04

Contribution Margin $47.83

Contribution Margin x Unit $0.96

Contribution Margin Ratio 95.65%

Fixed Costs $20.83

Total Costs $23.00

Total Costs x Unit $0.46

Break Even Point in Units 21.7727

Break Even Point in $ $21.77

Net Income Week $27.00

# Units

Total

Costs

Variable

Cost

Fixed

Cost Sales0 $20.83 $0.00 $20.83 $0.00

10 $21.26 $0.43 $20.83 $10.00

20 $21.70 $0.87 $20.83 $20.00

30 $22.13 $1.30 $20.83 $30.00

40 $22.57 $1.74 $20.83 $40.00

50 $23.00 $2.17 $20.83 $50.00

60 $23.43 $2.61 $20.83 $60.00

70 $23.87 $3.04 $20.83 $70.00

80 $24.30 $3.48 $20.83 $80.00

90 $24.74 $3.91 $20.83 $90.00

100 $25.17 $4.35 $20.83

$100.0

0


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Graph CVP Analysis

To define the relevant costs at this time are not considered in the reality, because it is a new

company, just have a few week in operation. But, to follow the objetives of the analysis, consider

the alternative one like the production of cheese pones and the alternative 2, the filled pones

with chiken. Some people do not like the cheese, but also some people do not like the chicken,

but booth kind of people enjoy the pones. to take this consideration, it is replace the cheese by

the chicken, to decide wich of those kind of pones are more profitable.

Arepas Colombianas

Switch the cheese for chicken

Projection Over the week

Total units 50

Direct materials


Chicken Tray 2 lb $2.53


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Milk 1 gallon $2.79


Indirect materials




Utilities



Transport*

1 Gallon

gas $2.57 Average

Total Costs

$18.3

1

Cost per Unit $0.37

Operation at % # units Costs

100 12 $4.40

95 11.4 $4.18

90 10.8 $3.96

85 10.2 $3.74

80 9.6 $3.52

75 9 $3.30

70 8.4 $3.08

Arepas Colombianas

High-Low Method


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February 25/2010 to March 04/2010

Production Based in Daily Sales

Units Costs Sales

Monday 12 $4.44

$12.0

0

Tuesday 7 $2.59 $6.00

Wednesday 11 $4.07

$11.0

0

Thursday 9 $3.33 $9.00

Friday 11 $4.07

$12.0

0

Total Week 50

$18.5

0

$50.0

0

High 12 $5.52

Low 7 $2.59

Selling Price x unit $1.00Variable

Cost $1.71

Variable Cost x unit $0.03

Contribution Margin $48.29

Contribution Margin x Unit $0.97

Contribution Margin Ratio 96.59%

Fixed Costs $16.79

Total Costs $18.50

Total Costs x Unit $0.37

Break Even Point in Units 17.3869

Break Even Point in $ $17.39

Net Income Week $31.50

At this point, are more profitable the Chicken pones due the low price of the chicken. At

moment to made the pones and sold, it is found that the people prefeer the cheese pones that


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the chicken pones. That day, the company just sold 3 pones of chicken and left 9 units, so,

generate a loose of $24.16. so, at this point it is consider the oportunity cost more that the

relevant costs, because the company reduce the costs, but are a product that do not have the same

demand that the cheese pones.

Now, to create a flexible budget for the sales levels at 95%, 100%, 105%, it is started with the

preparation of the operating budgets. Some of the budgets that it will be show, are the sales

budget, production budget, direct materials budget, income statement budget, and will made the

analysis at the different levels of sales of the flexible budgets. Due the budgets are a periodic

controls of the projections in the short term, Arepas Colombianas made the proyection until

the end of the present year, with the objetive to evaluate if the company was profitable, which

areas need to improve, which areas are relevants and also, try to keep the company in the market

to, in the long term, the company increase their operations.

Cost per unit $0.46 Weeks 12

Week of (days) 5

% # units Costs

Weekly

Prod

Quarter

Prod

150 18 $8.28 90 1080

145 17.4 $8.00 87 1044

140 16.8 $7.73 84 1008

135 16.2 $7.45 81 972

130 15.6 $7.18 78 936

125 15 $6.90 75 900

120 14.4 $6.62 72 864

115 13.8 $6.35 69 828

110 13.2 $6.07 66 792

105 12.6 $5.80 63 756

100 12 $5.52 60 720

95 11.4 $5.24 57 684

90 10.8 $4.97 54 648

85 10.2 $4.69 51 612


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80 9.6 $4.42 48 576

75 9 $4.14 45 540


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Arepas Colombianas

Sales Budget

For the year ending in Dec 31/2010

Quarter

Sales at 95%

1 2 3 4 Year

Expected unit sales 684 684 684 684 2736.0

Unit Selling Price $1.00 $1.00 $1.00 $1.00 $1.00

Total sales

$684.0

0

$684.0

0

$684.0

0

$684.0

0

$2,736.0

0

Quarter

Sales at 100%

1 2 3 4 Year



Total sales

$720.0

0

$720.0

0

$720.0

0

$720.0

0

$2,880.0

0Quarter

Sales at 105%

1 2 3 4 Year



Total sales

$756.0

0

$756.0

0

$756.0

0

$756.0

0

$3,024.0

0


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If take in consideration an increase by quarter of the production, almost of the 1%, it is

necessary taking in consideration the increases of the fixed costs, changes in the relevant range

and posible increases also in the variable costs, but keeping the same sales price per unit, while

the variables will increase. To reduce the fixed cost will be necessary change the equipment used

at this time, to reduce the comsuption of energy, and will be reevaluate the kind of envelope used

at the moment. Other way to reduce the costs, are changing the method of purchaing, due the

purchases are in normal supermarkets and if the company contact wholesale distributors, the

volume of the raw materials will increase at lower cost, and the company can keep the same sales

price. It to remember that due the nature of the product, it is impossible keep inventory at the end

of the day. So, make a production budget without the infraestructure to make the projections and

estimates, it is just an illusion. Anyway, it is for ilustrative purposes that is shows bellow: If it is

dessired a production of 756 units by quarter (105% of the production level), it is consider the

following:

Budgeted Sales units 720

Desired Ending Finished Goods 756

Beginning Finished Goods 600

Production required 876

The budgetes Sales units is taked in consideration with a 100% of the production daily and

with the period of five days by twelve weeks, that is the quarter. On the direct materials budget ,

was considered the table show above:

Direct Material Required for production $20,211.95

Desired Ending Direct materials 0

Beginning Direct materials$13,843.8

0Required Direct materials to be $6,368.15


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purchasedThe Manufacturing Overhead Budget is as shows bellow:

Quarter

Utilities 1 2 3 4

Energy $60.00 monthly$180.0

0$180.0

0$180.0

0$180.0

0

Water $32.00 monthly $96.00 $96.00 $96.00 $96.00

Transport $130.00 monthly$390.0

0$390.0

0$390.0

0$390.0

0

Envelope $14.00 monthly $42.00 $42.00 $42.00 $42.00

To make the flexible budget, takes the levels of 95%, 100% and 105% of production and

assuming that all the production are sold and do not leave a losses.

Arepas Colombianas

Sales Budget

For the year ending in Dec 31/2010

Quarter

Sales at 95%

1 2 3 4 Year Expected unit

sales 684 684 684 684 2736.0


Total sales$684.0

0$684.0

0$684.0

0$684.0

0 $2,736.00

Variable Costs $29.74 $29.74 $29.74 $29.74 $118.96

Fixed Cost$284.9

0$284.9

0$284.9

0$284.9

0 $1,139.60

Total Costs$314.6

4$314.6

4$314.6

4$314.6

4 $1,258.56

Net Income$369.3

6$369.3

6$369.3

6$369.3

6 $1,477.44

Quarter

Sales at 100%

1 2 3 4 Year Expected unitsales 720 720 720 720 2880.0

Unit Selling Price $1.00 $1.00 $1.00 $1.00 $1.00Total sales $720.0 $720.0 $720.0 $720.0 $2,880.00


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0 0 0 0

Variable Costs $31.30 $31.30 $31.30 $31.30 $125.22

Fixed Cost$299.9

0$299.9

0$299.9

0$299.9

0 $1,199.58

Total Costs

$331.2

0

$331.2

0

$331.2

0

$331.2

0 $1,324.80

Net Income$388.8

0$388.8

0$388.8

0$388.8

0 $1,555.20

Quarter

Sales at 105%

1 2 3 4 Year Expected unitsales 756 756 756 756 3024.0


Total sales

$756.0

0

$756.0

0

$756.0

0

$756.0

0 $3,024.00

Variable Costs $32.87 $32.87 $32.87 $32.87 $131.48

Fixed Cost$314.8

9$314.8

9$314.8

9$314.8

9 $1,259.56

Total Costs$347.7

6$347.7

6$347.7

6$347.7

6 $1,391.04

Net Income$408.2

4$408.2

4$408.2

4$408.2

4 $1,632.96

At this time is uncertain determine if the flexible budget are favorable or unfavorable, due the

short history of the company and the size of the same. It is important view that although the

company have an small size, started a few weeks ago and is a self-employment company, the

invests was very small, the profit it is very high (more of the 50% of the costs) and have the

acreditation of the customer that the product have a very good taste, smoothness and meets with

the expectatives that the people want.


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References

Weygandt, J., Kimmel, P., Kieso, D. (2010) Managerial Accounting Edition 5, Willey and

Sons, Inc.

Gomez, O., Zapata, P. ( 1998) Contabilidad de Costos, Tercera Edicion, McGraw Hill.

Final Proyect Arepas Colombianas

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