Direct materials cost analysis in the production of samoli bread in Forsan Bakery

Project principle investigators: Saud Al-Wagdani, Rayed Al-Thubaiti, Abdullah Al-Muhanna, Fahad Al-Faadhel

Supervisor: Dr. Muhammad Al-Salamah

Course: ISE-304 Principles of Industrial Costing

Institution: King Fahd University of Petroleum and Minerals

Abstract

In this report we present our findings on estimating direct materials cost in a large scale bakery. We focused on the production of samoli bread which is the most popular bread consumed in Saudi Arabia. We analyzed the production process and identified the steps followed to produce bread. Then, we identified the materials used to produce bread. After that, a standard for ingredients has been identified and the cost of production of an average units consumed per week was estimated. Finally, a conclusion and several recommendations have been presented.

Introduction

Bread is one of the fundamentals of food around the world. It is a part of almost all cultures and traditions. Nowadays more bakeries are competing to attract consumers’ attention by providing high quality bread with competitive price. Bread production is a lucrative business for those who succeed at it. We were asked to analyze the production of bread and estimate the costs associated with it. In this report we analyzed material cost in a large scale bakery called Forsan which is located in Riyadh. The bakery produces a large variety of bread, croissants, sweets, pastry and desserts. Our case study will focus on the production of (samoli) bread.

Raw Material

The ingredients of bread are flour, sugar, additives, milk powder, yeast, salt and water.

Process Description

Stage 1: mixing ingredients with dough and cold water

Stage 2: forming the shape of the bread on specific sizes

Stage 3: proofing the mixture with yeast to be ready for cooking

Stage 4: placing it in the oven with a temperature of 210˚

Stage 5: taking off the oven and cooling to room temperature

Stage 6: packing the ready bread

Stage 7: distribution

The stages are illustrated in the following diagram:

Data

We will consider a production demand for a week.

• The average demand is 33700 units per week
• The price of 1 pack of 4 units is 1 SR, hence the price per unit is s 0.25 SR
• Mixture needed for 15 units :

o 2 cups of water

o 0.5 bag of active dry yeast

o 1 tsp of salt

o 0.5 tsp of sugar

o 0.5 cup of milk powder

o 3 cups of flour

o 0.5 bags of additives

Costs

It will be assumed

• Scrap allowance assumed 15%
• Waste will be considered to be 10% of the total

Calculations

Ss = (Sf + Lw)×(1 + Ls + Lh)

Cdm = Ss Cms – Vs

Flour:

• 3 cups / 15 units à for 33700 units, we need 6740 cups
• Waste = 6740 * 0.1 = 674 cups

Starting Material = (6740+674) * (1+0.15) = 8526 cups

Material cost = 8526 * 0.18 = 1534.698 SR

Milk Powder:

• 0.5 cups / 15 units à for 33700 units, we need 1123 cups
• Waste = 1123 * 0.1 = 112 cups
  

S M = (1123+112) * (1+0.15) = 1420 cups

Material cost = 1420 * 0.11 = 156.27 SR\

Additives:

• 0.5 bags / 15 units à for 33700 units, we need 1123 bags
• Waste = 1123 * 0.1 = 112 bags:
  

S M = (1123+112) * (1+0.15) = 1420 bags

Material cost = 1420* 0.27 = 383.4 SR

Salt:

• 1 tsp / 15 units à for 33700 units, we need 2247 tsp
• Waste = 2247 * 0.1 = 225 tsp

S M = (2247+225) * (1+0.15) = 2842 tsp

Material cost = 2842 * 0.05 = 142.12 SR

Sugar:

• 0.5 tsp / 15 units à for 33700 units, we need 1123 tsp
• Waste = 1123 * 0.1 = 112 tsp

S M = (1123+112) * (1+0.15) = 1420 tsp

Material cost = 1420 * 0.085 = 120 .75 SR

Water:

• 2 cups / 15 units à for 33700, units we need 4493 cups
• Waste = 4493 * 0.1 = 449 cups

S M =(4493+449) * (1+0.15) = 5683 cups

Material cost = 5683* 0.015= 85.25 SR

Yeast:

• 1 bag / 15 units à for 33700 units, we need 1123bags
• Waste = 1123 * 0.1 = 112 bags

S M = (1123+112) * (1+0.15) = 1420 bags

M cost = 1420 * 0.15 = 213 SR

Total Material Cost = SUM = 2635.6 SR for 33700 units

Cost per unit = SR 0.08

Conclusion Recommendation

In this report we presented a case of estimating materials cost in the bread industry. The cost per unit of samoli bread was SR 0.08 while it is sold for SR 0.25 which is a reasonable price for samoli bread. To improve the process and further improve the profitability we can do some actions that will reduce the cost. Since we are working on materials cost it is a good idea to look for waste and try to reduce it or eliminate it. After analyzing the process, we assumed that the waste was 10 % and the scrap was 15%. By the use of improved processes and the introduction of automated machines, we can reduce those significantly. Another possible solution is to increase the amount of yeast to increase the size and reduce the amounts of other materials included without sacrificing the quality of bread produced.

تحليل تكاليف المواد الخام في إنتاج صناعة الخبز في مخابز الفرسان
الباحثين الاساسيين: سعود الوجداني، رائد الثبيتي، عبدالله المهنا، فهد الفاضل
المشرف: الدكتور محمد السلامة
المادة: مبادئ حساب التكاليف الصناعية
المؤسسة التعليمية: جامعة الملك فهد للبترول والمعادن