Caroline Rittiner
Writing Assignment 2
March 8, 2012

A) Super Bakery, founded by Franco Harris in 1983, has developed into a virtual corporation in which only core strategic functions are actually performed in house. The remaining activities , such as distribution, selling and manufacturing, are outsourced to specific external companies. The implementation of this virtual strategy, and several other unique tactics, helped Super Bakery increase their sales and productivity in the years following. However, when implementing a virtual corporation, there are several risks involved which management was well aware of. The wide variety of costs involved with serving such a broad range of customers proved to be problematic. Super Bakery decided to implement an ABC costing system, whose main focus is capturing cost by customer order rather than by a specific product. Consumptions of costs are recorded directly when then occur, or through the use of cost drivers as needed. Super Bakery uses historical costs when actual costs or unavailable, and costs drivers when historical cost and direct costing are unattainable. Super Bakery uses specific responsibility centers for those functions they perform in house, and other arm’s length centers for outsourced activities. Through the use of the company’s relational database, Super Bakery is able to examine costs incurred by several different fields, and evaluate such costs based on profitability and performance of different parts of the business.

B) The ABC system adopted by Super Bakery proved to be a necessary addition to help the company maximize their profits by enabling them to accurately control their costs. Prior to the implementation of the ABS system, many of the costs assigned to customers were not associated with their actual costs. The costs were being misrepresented because of the wide variety of customers and