2021
Teaching
Innovation
Award
George Krull/Grant Thornton
Honorable Mention
How Much Money Am I Making? BeYoutiful
Bath Bombs Inventory Costing Project
Tara Lambert, CPA, MBA, D.B.A.
Whitworth University
Academic and Student
Engagement
Educator Bio
Tara Lambert, DBA, CPA, is an assistant professor of accounting at Whitworth University in
Spokane, WA. This fall she will begin her ninth year teaching in higher education. Prior to
entering academia she worked for 19 years in private industry. Her teaching areas include
Managerial Accounting, Cost Accounting, Intermediate Accounting and Auditing. Each semester
she integrates experiential learning assignments for students to apply accounting theory to serve
the needs of local businesses. In past assignments students computed inventory cost and gross
profit margins, prepared inventory tracking spreadsheets, developed cash flow projection
models, and completed a review for a small non-profit company. Each project requires students
to gain an understanding of the client in order to solve business problems, and then use analytical
and written and oral communication skills to present detailed solutions.
How much money am I making? BeYoutiful Bath Bombs Inventory Costing Project
Abstract:
In this three part experiential learning project, students work with a small local business called
BeYoutiful Bath Bombs. Using standard cost accounting concepts from Managerial and Cost
Accounting, students calculate cost and gross margin of four top selling inventory items in excel.
Next, they are required to write a memo addressed to the business owner in which they describe
how they arrived at their calculations. At the end of the project, students present their results to
the business owner in a power point presentation and deliver an excel spreadsheet that can be
updated in real time for changes in raw material costs or selling price.
How much money am I making? BeYoutiful Bath Bombs Inventory Costing Project
Learning objectives:
1. Understand the client business and its environment
2. Apply standard cost accounting concepts to determine inventory valuation
3. Use excel to analyze data and arrive at final inventory cost
4. Write a business memo describing the inventory valuation process
5. Deliver an oral presentation using power point or similar program to the business owner
How much money am I making? BeYoutiful Bath Bombs Inventory Costing Project
AICPA core Competencies:
This experiential learning project helps develop students as future accountants and addresses
several AICPA core competencies including:
Accounting competencies
Business competencies
Professional competencies
Measurement analysis and
interpretation: Students apply their
knowledge of standard cost
accounting to compute inventory
cost and gross profit margin of 4
inventory items.
Strategic perspective: Students
measure cost and gross profit margin
of inventory items at regular price
and at a "buy 4 get 1 free" price.
They must answer the question: is
this sales offer profitable? How do
these prices compare to similar
products in the market? How else
could the business owner apply
pricing strategies?
Professional behavior: Students
practice professional behavior
when interacting with the business
owner to understand the business
environment, ask important
questions, and create solutions.
Reporting: Students write a
business memo that clearly explains
how they arrived at the inventory
cost of each item. Each group is
also required to deliver an oral
presentation summarizing their final
calculations and recommendations
for the business owner.
Global and industry perspectives:
To complete this project students
must understand the business, the
business environment and its
competitors to make final pricing
recommendations and suggestions
for improvements.
Decision-making: Students use
cost accounting concepts to
create an inventory costing model
and then using current selling
prices, compute gross profit
margins. Finally, analyze if "buy 4
get 1 free" sale offers are
profitable.
Technology and tools: Students
create a spreadsheet to arrive at the
cost of each inventory item. They
also use power point or a similar tool
to deliver their final presentation.
The practice of creating costing
models in excel helps students
clearly understand the final
inventory values and will give
students confidence to explain both
orally and in writing their results to
the business owner.
Collaboration: Students
individually compute inventory
cost and then together in small
groups arrive at a consensus to
present in a spreadsheet to the
business owner. This allows for
deliberation among team
members during which students
raise questions and give support
for their own calculations before
arriving at the final amounts.
Communication: Students use
both written and oral
communication skills to present
solutions to the business owner.
Project management: Students
work together in small groups to
complete the project by the end of
the semester.
How much money am I making? BeYoutiful Bath Bombs Inventory Costing Project
Assignment description:
BeYoutiful Bath Bombs is a small business located in Spokane, WA. Jessie, the owner, started the
business after her young her brother was diagnosed with cancer. Her goal was to produce top of
the line, healthy bath and body products that all families can afford. Jessie does not have a
system in place to value her inventory items and would like to know how much money she is
making on each product. Your task is to compute the standard inventory cost and gross profit
margin for four of her top selling items; Bath-Bombs, Mini-Bombs, Bomb-in-a-Bag and
Bubbling Bath Salts.
1. In excel, begin with the recipe of direct materials for each item. Create a conversion chart
for how bulk weights purchased are converted to direct materials used for each inventory
item. Assign direct materials cost to each item. Next, assign direct labor costs based on
labor cost per hour and time required to make each item. Don’t forget to also add the cost
of packaging. Combine the direct materials, direct labor and packaging costs for each
item to arrive at a total cost per unit. Finally, using current selling price and cost per unit,
calculate gross margin for each of the four inventory items. What is the gross profit when
the business owner might run a “buy 4 get 1 free” promotional offer? Which item is most
profitable? Which item is the least profitable, and why?
2. Write a memo to the business owner that describes how you used cost accounting
concepts to arrive at your inventory values and gross profit margin amounts. Include your
calculations when there is a “buy 4 get 1 free” sale. What recommendations do you have
for the business owner?
3. Work together in small groups to decide on a final inventory cost and gross profit amount
for Bath-Bombs, Mini-Bombs, Bomb-in-a-Bag and Bubbling Bath Salts. Create one final
excel costing spreadsheet for the business owner that can be updated if the cost of bulk
purchases or sales prices change.
4. Finally, create a power point presentation that you will use when you deliver your
presentation of calculations and recommendations on inventory costing to the business
owner.
The recipes, costs of direct materials, packaging costs, direct labor time and costs, and
sales prices are listed below.
Note: Bath-Bombs, Mini-Bombs, Bomb-in-a-Bag and Bubbling Bath Salts are pictured above
Solution set:
How much money am I making? BeYoutiful Bath Bombs Inventory Costing Project
Course: Cost accounting (BU332), project first implemented in fall semester 2020
Student comments:
“I think it was really interesting to do this project in small groups first, then have each group
share to the rest of the class. Each group took a slightly different approach to the project and had
slightly different estimates for the data, so it was interesting to see how the different group
dynamics affected the end result of their project. I remember one group added an extra ratio that
wasn't required as part of our assignment, and it was a really simple calculation yet very
applicable to this project and made their data easier to comprehend (it was something simple like
profit margin %). Our group just looked at each other like, 'why didn't we think of that?', because
it was a simple concept we had all learned in class, but it just didn't occur to any of us to apply it
to the project at the time since it was outside of what was 'required.”
“I think this a real-life demonstration of what happens in the workplace, when your boss might
request a certain project from you and other coworkers, but if you want to stand out and make an
impression, you have to think outside the box and apply the knowledge you've learned!”
“This project really showed the importance of teamwork, even in a profession like accounting
where it seems like accountants typically work on their own projects without an active team
dynamic. With this project, we had all of our minds working together at the same time, so we
could immediately catch mistakes as they were made and fix them so that they wouldn't create a
negative impact on the rest of our project.”
“I think the most unique and impactful part of the presentation was that we were doing it for the
business owner herself. As college students, we are constantly putting together presentations just
for the professor and the class, in order to earn a grade for an assignment, but rarely do we feel to
do something with an applicable, real-life effect. In this project, we knew that we working with
actual products for an actual business, and that in the end we would be delivering our
presentation to the actual business owner. I believe this affected our motivation to make sure that
we were doing everything accurately, and it inspired us to get creative with adding any additional
data or recommendations that we thought could be helpful to the business-owner, even if it was
outside of the 'rubric' for the class project.”
“As a business owner one can spend the time and become very good at getting permits or having
a great relationship with vendors, however if you do not know how much you are profiting from
what you sell you could be leaving money on the table and unaccounted even losing money.”
Anticipated changes for future semesters:
1. Require students to think about manufacturing overhead costs; have students draw a
picture of the business floor plan and consider whether a percentage of overhead costs
could be allocated to the cost of inventory items according to the square footage of the
processing area.
2. Require students to perform break even and target profit analysis with fixed costs.
3. Require students to complete peer reviews of the written business memos before final
drafts are submitted.
How much money am I making? BeYoutiful Bath Bombs Inventory Costing Project
Rubric:
Individual portion: 40 points total
• Prepare an excel spreadsheet with costing models for the 4 inventory items and “buy 4
get 1 free” offers (20 points)
• Prepare a one page memo to the owner explaining your cost accounting (20 points)
Group portion: 20 points total
• Arrive at a consensus on costing for each inventory item and provide one excel
spreadsheet of your inventory costing to the owner. Link cells so that if bulk prices, wage
rates or selling prices change your inventory cost and profit margin amounts will update
automatically (5 points)
• Prepare a 5-10 minute power point presentation for the business owner to provide clear
explanations of final inventory cost, gross profit margins and final recommendations
(15 points)
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