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Costing Methods Tony Zazzarino University of Phoenix

Costing Methods Super Bakery Incorporated is a nationwide bakery that supplies bakery items to schools. Super Bakery is a virtual corporation that performs only strategic parts of the business, and the other activities are outsourced. The company wanted to the maximum value with little investment in operating functions. The company has reviewed the initial strategy to increase the profit while improving some of the current systems (Kimmel, Weygandt, & Kieso, 2009).
Strategies
The initial strategy of the company was to charge the same for every customer order making an assumption that each order cost the same to make. The management team took the cost and spread the costs evenly over the customer base with the knowledge that each customer order was a different cost (Kimmel et al., 2009). The management’s strategy was the orders that cost the company more to make were offset by the orders less costly to make. The management of the company realized the company had a better profit potential if the company used an activity-based costing system (ABC).
ABC System The decision the management of Super Bakery made to install an ABC system was a good decision. The company needed to realize the cost of each order versus the overall cost of the outsourcing. An ABC system will allow the management to find the actual cost of each outsourced company. The installation of the ABC system was necessary to help the company find the exact costing of each product and company the bakery was outsourcing product to. The ABC system will allow the company to look at each of the companies the bakery is outsourcing work to and determine if this is the best company to use. The ABC system will allow the management to break down each product and determine what the viable

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