...Costing Methods: Super Bakery, Inc. George Mancuso ACC/561 Accounting March 18, 2013 Lisa Parker Abstract Super Bakery, Inc., a virtual corporation is a supplier of mineral-, vitamin-, and protein-enriched doughnuts and other baked goods to institutional food distribution centers nationwide (Kimmel, Weygandt, & Kieso, 2009). The company has grown at an average rate of 20% annually since 1990 but persistent challenges of identifying opportunities for cost efficiency in using traditional costing methods requires new strategy. Desire for new “system that would more accurately assign the costs of each order” (Kimmel, Weygandt, & Kieso, 2009, pg. 865), Super Bakery is exploring activity-based costing (ABC) management. Super Bakery, Inc. In 1990, former Pittsburg Steeler’s player Franco Harris incorporated the Supper Bakery, a nationwide supplier of mineral-, vitamin-, and protein-enriched bakery goods to the institutional food market (Kimmel, Weygandt, & Kieso, 2009). As a virtual corporation, Super Bakery’s core business functions are maintained within the company. Other business functions such as “selling, manufacturing, warehousing, and shipping—are outsourced to a network of external companies… to add maximum value to the company while making the minimum investment in permanent staff, fixed assets, and working capital” (Kimmel, Weygandt, & Kieso, 2009, pg. 865). Currently the company is using a traditional costing method that does not identify the accurate...
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...a new 1.5 gigabyte computer memory chip on behalf of EEC while using a job order costing system, which is a costing system where costs are to be collected then assigned to different units of production for each unique job, or process costing system, which is a costing system that is known to accumulate production costs by using a department or process’s data over a specific period of time in order to report the costs of a new product. I am going to focus and highlight the many differences within the various systems in use to do this job. I will also attempt to describe how these selected systems will work for EEC in order to track the costs of these products. Furthermore, my job in this assignment will be to identify the actual cost driver in order to explain the pattern and process of cost tracking. I will then go on to provide examples of products that the EEC’s firm could offer in order for a job-order costing system to be appropriately applied. •Should EEC use a job-order costing system, which is a costing system where costs are collected and assigned to units of production for each individual job, or a process costing system, which is a costing system that accumulates production costs by process or department for a given period of time, to report the costs of this new product? ◦How are the systems different? I believe that EEC should most definitely use a job-order costing system. “Job order costing systems are simply the various components of a much broader form of accounting...
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...Costing Methods Paper Amy Buckley University of Phoenix Bellevue Campus ACC561 April 2012 Instructor: Solomon Seyoum Costing Methods Paper Understanding and selecting the optimum method of cost accounting is vital to a company’s success and sustainability. Two types of costing methods are available: the traditional cost accounting method or the activity based cost system. Each delivers pros and cons; therefore each company may choose one or the other. The traditional method matches the indirect costs to the volume based products, the hours of direct labor, or the hours of machine production hours (Accounting Coach, 2012). Activity based accounting products eat up activities and lead to consumption of resources. Activities are cost drivers and may not lead to a large number of products being produced. Therefore; distributing costs fall under the following: taking an order, customer challenges, and implementation of new hardware. This provides the company with a clear understanding of: the arrival of a profit, the outflow of money, and the departments of cost reduction (BusinessDictionary.com, 2012). Traditional costing methods versus an activity based cost system, a choice Super Bakery Inc. would review again. Strategies Super Bakery Inc. launched approximately 30 years ago into the food industry. Breaking into the market was slow and challenging; therefore the company developed four strategies to rise above the competition. Super Bakery selected...
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...Kendra Mum Accounting 203 Judith Paquette Job-order costing system are used when: 1. Many different products are produced each period. 2. Products are manufactured to order. 3. The unique nature of each order requires tracing or allocating costs to each job, and maintaining cost records for each job. Example of companies that would use job-order costing include: 1. Boeing 2. Bechtel International 3. Walt Disney Studio Job Order Costing (Example) Direct material and Direct Labor goes to every job Job Order Costing (Example) Manufacturing including indirect materials and indirect labor are allocated to all jobs rather than directly traced to each job An allocation base, such as direct labor hours, direct labor dollars, or machine hours, is used to assign manufacturing overhead to individual jobs. We use an allocation base because: a. It is impossible or difficult to trace over head cost to particular jobs. b. Manufacturing overhead consists of may different items ranging from the grease used in machines to the production manager's salary. c. Many types of manufacturing overhead costs are fixed even though output fluctuates during the period. Manufacturing overhead application: POHR= Estimated total manufacturing overhead cost/ Estimate total units in the allocation base The need for a pohr Using a predetermined rate makes it possible to estimate total job costs sooner. Actual overhead for the period is not known until the end of the period. Computing predetermined...
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...activities inside the organization - many companies call it finance or corporate finance - no required rules and regulations such as Generally Accepted Accounting Principles or Financial Reporting Standards - can and does use projections about the future - managerial accounting information must meet a cost-benefit test or the benefit from providing information must exceed the cost of obtaining the information - new initiatives such as activity-based costing and the balanced scorecard must pass the aforementioned tests Problem 1.2 for Self-Study: Match the concept with the definition. Concept Definition Cost a. Costs directly related to a cost object Opportunity cost b. A sacrifice of resources Expense c. Costs not directly related to a cost object Cost Object d. Any item for which a manager wants to measure a cost Direct Costs e. A cost charged against revenue in an accounting period Indirect Costs f. The return that could be realized from the best forgone alternative use of a resource Answer: Concept Definition Cost b. A sacrifice of resources Opportunity cost f. The return that could be realized from the best forgone alternative use of a resource Expense e. A cost charged against revenue in an accounting period Cost Object d. Any item for which a manager wants to measure a cost Direct Costs a. Costs directly...
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...MANAGEMENT TECHNOLOGY DEPARTMENT OF ACCOUNTING AND FINANCE. COURSE TITTLE: COST ACCOUNTING (BAT 212) ASSIGNMENT QUESTION:- WITH A CASE STUDY, DISCUSS THE IMPORTANCE AND APPLICATION OF COSTING TECHNIQUES IN HOSPITALITY INDUSTRY IN NIGERIA? (CASE STUDY OF YANKARI MASS TRANSIT CORPORATION) By Nwankwo Stephen c. TABLE OF CONTENTS 1.0 INTRODUCTION 1.1 Background of the assignment 1.2 Purpose/objectives of the assignment 1.3 Definition of the term 1.4 Historical background of the case study ABSTRACT The aim of the assignment is to find out the importance of using costing techniques such as operating costing, standard costing, direct costing, absorption costing etc. in one of the sub-sector of Nigerian economy(hospitality). And also to identify the techniques adopted by the hospitality industry and it’s important to the organization. INTRODUCTION 1.1 BACKGROUND OF THE ASSIGNMENT The hospitality industry is a broad category of fields within the service industry that include lodging, transportation, and additional fields within the tourism industry. Since the introduction of money, people have been concerned with cost. They think of how to manage money. Costing system was first recognized in manufacturing industries with the aim of finding the cost of production or cost of a product, presently, the system is used very widely in other establishments such...
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...The Impact of Healthcare reforms on Hospital Costing Systems The costing systems implemented in hospitals has been the same for a while now. It’s worked and has been easily allocated based off of averages from previous years. Now as times change so will the costing systems for hospitals in order to get the most beneficial cost-reductions to them as well as improve on efficiency. This article looks into how accountants for hospitals can redesign, reposition, and re-implement costing ideas to allocate on a per-unit of care basis (Selivanoff, 2011). We’ll take a look at two ways for accountants to prepare for these reforms and five steps to adjusting the costing systems in place. In the hospital costing system accountants want to measure costs during a patients stay to determine how much resources are being used. The one way accounting departments are improving efficiency is deter away from the average costs for their resources. Rather than allocating a hundred dollars for this test and a hundred dollars for this procedure they want to implement an “on-the-fly” care plan. Which measures truly how much a patient is costing them to get the optimized cost-reduced methods. It allows them to take a deeper look into inventory and assign costs to each resource so that patients really pay for what they used and hospitals have a clear costing method that’s equal for every person. This method is effective but is highly stressful for the accounting department to record at first...
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...companies underrate the cost accounting systems’ importance, we cannot put them aside. Cost accounting has to provide relevant cost information for corporate executives to make correct decisions. Traditional cost techniques cannot model the really needed expenditures for producing a product well. Because of this, some techniques were developed, which measure the relation between costs and cost originators in more complex correlations and not just with a simple quantity-cost relations. Beside the traditional techniques (actual costing, standard costing, normal costing, etc.) new methods appear. Among the others, these are: Activity-Based Costing, Target costing, Process Cost System and Marginal Costing. The aim of this paper is to present these cost methods’ advantages and disadvantages, in order to find out, how the cost accounting profession can answer to the challenges of new business circumstances. Keywords: cost accounting, traditional methods, target costing, ABC method 1 INTRODUCTION Accounting, as business function,...
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...ACTIVITY-BASED COSTING & BUDGETARY PLANNING AND CONTROL AT AEROSPACE MANUFACTURING INDUSTRY By WAN MOHD SHOFIAN CHE WAN ABU BAKAR SITI IRSALINA AIZAD ABU BAKAR MOHD FARID HUSSEIN JUNAIDA MOHD DAUD HASLAN LAIRIN Subject: MANAGERIAL ACCOUNTING (ACC 720) Lecturer:- DR. HJ. SOFIAN SHAMSUDDIN TABLE OF CONTENT No | Title | Page | 1. | Group member personal profile | | 2. | Objective of study | | 3. | Definition 1) Activity Based costing 2) budgetary planning & Control | | 4. | introduction of the company | | 5. | product | | 6. | Activity based costing | | 7. | budgetary planning & Control | | 8. | | | | | | GROUP MEMBER PERSONAL PROFILE | Name:Mohd Farid bin Hussein | | Job Designation:Executive, Talent Management in Tenaga Nasional Berhad (TNB) | | Qualification: Bachelor of Business Administration (BBA) Hons. (Human Resource Management), Universiti Tenaga Nasional (UNITEN) | | Contact Number : 019-2898909 | | Relevant Working Experience:Farid has more than 3 years in human resource background in areas such as Organisational Design, Training and Performance Support and Talent Management. He joined TNB after serving another GLC, Chemical Company of Malaysia (CCM) as a Management Trainee for a year.He specializes in talent management namely identifying and develop internal talents, developing assessment tools and forming HR strategy such as designing the organisation structure, designing...
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...Cost Accounting B.Com (Annual) Part-II Paper-IV Maximum Marks: 100 (Pass Marks: 40) Duration of Examination: 3 hrs Course Contents: Topic Source Sections Concept and Scope of Accounting: Definition, cost elements, nature and objective, charts of accounts and coding in cost accounting. Ch 2, Book 1 A Cost Classification and Flow: Product and period cost, direct and indirect cost, Differential cost and revenue, Opportunity and Sunk cost, fixed and variable cost, mixed cost, statement of cost of goods manufactured and sold statement. Ch 1, Book 2 Ch 2, Book 1 A Material Planning, Controlling and Costing: • Procedure for material procurement and use • Material costing methods • Inventory valuation at cost or market whichever is lower • Procedure for spoiled, scrap and defective work • EOQ , Inventory level and reserve stocks • Valuation of inventory • Planning materials requirement • Materials control Ch 7,8, Book 1 A Labour Controlling and accounting for costs: • Productivity and labour costs • Incentive wage plans • Learning curve theory • Organisation for labour cost accounting and control • Overtime plans, Bonus payments, vocation pay guaranteed annual wage plans , apprenticeship and training programs • Human resource accounting • Pension plans • Labor related deductions Ch 9,10, Book 1 A Factory Overhead Planned, Actual and Applied Variance Analysis: • Procedure of factory overheads including apportionment • Applied and actual FOH,...
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...Two (SMU2) were: 1) the product costing system allocated cost unfairly; 2) operating profit did not reflect true performance of the unit. It was obvious that Fine Foods needs to change the cost allocating system. They could either improve the current cost system or change to a new cost allocating system. My recommendations for Find Foods are to: 1) change to activity-based system; 2) use contribution margin 1 to evaluate performance. INTRODUCTION Fine Foods produced a wide range of food products in the upper Midwest United States. It was organized into three SMUs based on the markets they serve. SMU2 was the main focus of this case study; they served mostly institutional customers who order in large volumes, and also special orders. The special orders MP constituted 2% of total revenues. The advantage of MP was that it has a flexible schedule in production. In the next sections, I will explain why allocating some of the fixed production costs could be misleading for SMU2. The primary evaluation for SMUs’ performance was operating profit. At Fine Foods, operating profit was complex to calculate. As shown in table 2, Fine Foods had four contribution margins before obtaining the operating profit. In the next sections, I will explain how some costs should not be accounted to evaluate the unit’s performance. PRODUCT COSTING & SPECIAL ORDERS In the case of Fine Foods, costs could not be traced physically through the current costing system. Most of the fixed production...
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...1.0 Life cycle costing (LCC) 1.1 Definition Life cycle costing is a cost management approach which includes all costs and ensures that all those costs are managed over the life cycle of the product. Product life cycle begins from conception of the product until its abandonment which can be referred as ‘from cradle to grave‘. Product life cycle has four stages: 1) Product planning and initial concept design It involves process of identifying any underlying conditions, assumption, limitations and constraints such as minimum asset performance, maximum capital costs that might restrict the range of acceptable options to be evaluated. It is a valuable reference for better decision whether the plan should be carried on. This includes the research and development cost market research costs. 2) Product design and development Starting from preparation of development contract until equipment is ready to be introduced to the business. It is also a stage where the factory trials take place. Cost of product design, prototyping, and market testing costs. 3) Production All the manufacturing costs related to producing the products such as direct material, labor, overhead and administrative costs will be incurred. 4) Distribution and customer (or logistical) support This stage is where product are sent to customers and ready to be used. All marketing, selling and distribution costs are incurred at this stage. As for logical support cost, it involves delivery and transportation...
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...Decision Making Cost Categorisation and Classification Introduction Some Introductory Definitions Categorising Cost to Aid Decision Making and Control Management Responsibility Levels Cost Units Cost Codes Patterns of Cost Behaviour Influences on Activity Levels Numerical Example of Cost Behaviour Direct and Indirect Costs Introduction Material Costs Labour Costs Decision Making and Direct Costs Overhead and Overhead C Absorption Costing Introduction Definition and Mechanics of Absorption Costing Cost Allocation Cost Apportionment Overhead Absorption (OAR) Under and Over Absorption of Overheads Treatment of Administration and Selling and Distribution Overhead Uses of Absorption Costing Page v vii ix 1 2 2 4 6 11 14 17 18 19 21 26 27 28 29 30 30 33 34 34 38 43 43 45 46 46 47 48 52 57 59 60 2 3 4 © ABE ii Chapter Title 5 Marginal Costing Introduction Definitions of Marginal Costing and Contribution Marginal Versus Absorption Costing Effect of Absorption Costing and Marginal Costing on Profit Application of Marginal and Absorption Costing Activity-Based and Other Modern Costing Methods Introduction Activity-Based Costing (ABC) Just-in-Time (JIT) Manufacturing Product Costing Introduction Costing Techniques and Costing Methods Job Costing Batch Costing Contract Costing Process Costing Treatment of Process Losses Work-In-Progress Valuation Joint Products and By-Products Other Process Costing Considerations Cost-Volume-Profit Analysis Introduction The Concept of Break-Even...
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...ch05.qxd 9/27/04 4:19 PM Page 174 CHAPTER Q1 Q2 Q3 Q4 Q5 Q6 Job Costing In Brief Custom products and services, which are produced singly or in small batches, need to be valued for financial statements, tax reporting, and management monitoring. Job costing is an accounting method used to assign product costs to custom products or services. In job costing, direct costs are traced and overhead costs are allocated to individual jobs. Sometimes defects occur in custom products. Defective units can sometimes be reworked. The costs for both spoilage and rework need to be accounted for, as does the cost of scrap that arises from production. This Chapter Addresses the Following Questions: How are costs assigned to customized goods and services? How is overhead allocated to individual jobs? What is the difference between actual costing and normal costing? What are the uses and limitations of job cost information? How are spoilage, rework, and scrap handled in job costing? What are the quality and behavioral implications of spoilage? ch05.qxd 9/27/04 4:19 PM Page 175 BOMBARDIER: CUSTOM MANUFACTURING n 1942, the Canadian company L’AutoNeige Bombardier Limitée began manufacturing tracked vehicles for snow-covered terrain. These vehicles were early models of what later became snowmobiles. In English, L’Auto-Neige means snow car. Over time, the company developed expertise in building engines and expanded into other markets such as personal watercraft, aircraft, subway cars, buses...
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...1.) Costs assigned to the building of a house should appear on the income statement when Answer | a. | the purchase order to manufacture the house is received. | | b. | the house is sold. | | c. | cash is collected for the sale of the house. | | d. | the house is completed. | 2.) The basic document for keeping track of costs in a job order costing system is a Answer | a. | labor time card. | | b. | job order cost card. | | c. | process cost report. | | d. | materials requisition form. | 3.) The following information is available at the end of May: Balance in work in process on May 1 | $141,800 | Direct materials costs for May | 174,500 | Direct labor costs for May | 162,500 | Overhead applied at rate of 140% of direct labor dollars | | | Jobs completed during May: | | | | Job 84 | $198,780 | | Job 85 | 102,520 | | Job 86 | 119,450 | | Job 87 | 93,150 | | | | Job 88 was not complete at the end of May. | | | | If $72,400 of materials were charged to Job 88's job cost card, how much overhead was applied to Job 88? Answer | a. | $70,000 | | b. | $120,000 | | c. | $72,400 | | d. | $35,100 | 4.) Unit costs for each job are computed by dividing Answer | a. | estimated total costs by planned units to be produced. | | b. | actual costs by actual units sold. | | c. | cost of direct materials, direct labor, and overhead by number of units produced. | | d. | estimated...
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