...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...
Words: 687 - Pages: 3
...Running head: COSTING METHODS PAPER Costing Methods Paper Marsha Pettus University of Phoenix Accounting ACC/561 Bethany Kessel November 27, 2013 Costing Methods Paper Super Bakery, Inc. was founded by Franco Harris, formerly of the Pittsburgh Steelers, in 1990. The corporation supplies healthy, vitamin enriched doughnuts and other baked goods, out of an initial desire to make a difference in the institutional food market by targeting school systems nationwide (Kimmel, 2009). While, the company experiences positive growth since its inception, Super Bakery is at the point where it needs to explore a costing system that can establish a more accurate product costing method that can, at minimum, improve control of overhead costs. What strategies did the management of Super Bakery, Inc. use? Formed as a virtual corporation, Super Bakery designed a business model that performs key strategic planning and business functions in-house while outsourcing all manufacturing components as a cost reductions strategy. Super Bakery successfully maximizes profits by outsourcing all other components such as sales, manufacturing, warehousing, and shipping to external companies (All Business, 2012). As a result, Super Bakery watched its profits successfully grow, on an annual basis by 20%, since its inception in 1990. Why did Super Bakery’s management think it was necessary to install an ABC system? Super Bakery, Inc. believed it was necessary...
Words: 915 - Pages: 4
...Costing Methods Paper- Learning Deliverable Team A found that the best method to utilize in the case of cost methods is the absorption method. Although in both the absorption and variable costing method there are net income losses, the loss of revenue for the absorption costing method is far less than that of the variable costing method. By utilizing this method over the variable costing method, we find that Polk Company saves money and can recover from loss by providing a more accurate visual of the profit goals of the company while giving the company a higher net income. Benefits of the absorption method include still have an option to sell the items during another period if the products are not sold within the same accounting period. If a company uses absorption costing that is the only method they will have to use. Flexible budgeting can be implemented and molded around the loss to cover the company from any potential recurrences of that amount of loss in the next year. In contrast, benefits of variable costing methods include having a lower manufacturing cost per unit while ensuring that bills and expenses are taken care over a period of time. This results in a surplus shown if products are sold within that period (Kimmel, 2011). In terms of a competitor submitting lower bids for a product, the variable costing method net income is not affected with changes in production, therefore managers don't tend to make the mistake of overproducing. The reality is that absorption...
Words: 380 - Pages: 2
...Cost Method Problem: ABC a Virtual Organization The Super Bakery supplies mineral, vitamin, and protein enriched baked goods to food markets like school systems. The strategic functions of the company are performed internally. The other activities including sales, warehousing, and shipping are outsourced to various external companies. The following questions explain the costing methods of the Super Bakery and what costing method system is the best process for the Super Bakery. Cost Methods Evaluated * What strategies and tactics did the management of Super Bakery, Inc. use to increase sales and growth? Management of Super Bakery Inc. increased sales by combining the external companies together with the parent company for maximized values and work flow. These values include: * Minimum investment * Staffing expenses * Fixed assets * Working capital. The growth of the company consists of controlling the quality and costs of services, which was not easy when the costs increased for orders in different parts of the country. The high profit margins were subsidizing orders with low profit margins and the Super Bakery needed a system to assign costs to each order correctly. * Why did Super Bakery’s management think it was necessary to install an ABC system? Do you agree with their reasoning? If you disagree, identify your recommended costing system, including your rationale, to management. I agree with the Super Bakery for installing the ABC system. Activity-Based...
Words: 633 - Pages: 3
...[pic] Managerial Accounting BA3201 |Puganeswary Thirumalai Naidu |307254805 |BABHM | |Tan Lian Ping |11001200428010 |BABHM | |Yasmin Lim Binti Mohd.Arifin |307147803 |BBA MKT | |Herry Abubakar Mshihiri |609687502 |BBA IB | Question1 | |Task 1 : Sales and Labour Budgets : University | | | | | | | | | |1 (a) | | | | | ...
Words: 1871 - Pages: 8
...Costing Methods ACC/561 May 14, 2012 Costing Methods According to Kimmel, Weygandt, and Kieso (2009), “a traditional costing system allocates overhead on the basis of a single predetermined overhead rate.” Although this may be the best costing method for some businesses, not all businesses are the same. Created in 1990, Super Bakery, Inc. started by using the traditional costing methods to determine costs; however, quickly came to realize that the methods were not taking individual markets into consideration. The purpose of this paper is to elaborate upon Super Bakery, Inc.’s transition from a traditional costing method to an activity-based costing method. In doing so, an attempt will be made to highlight the strategies of Super Bakery Inc.’s management team. Furthermore, this paper will share why the management of Super Bakery Inc. deemed it necessary to install the ABC system. Finally, the paper will divulge why a job order cost system or a process order cost system would or would not work for Super Bakery Inc. Strategies Super Bakery Inc. is a virtual company that outsources most of the manufacturing activities. By outsourcing most of the manufacturing activities, Super Bakery Inc. can save on cost associated with owning machinery. Not only does Super Bakery Inc. save on the cost of the machinery but also on the costly expense of maintenance and repairs. Furthermore, the company could reduce overhead expenses such as salaries and even utilities. By using this strategy...
Words: 627 - Pages: 3
...Costing Methods Paper LaKeisha R. Fields ACC/561- Accounting July 15, 2013 Facilitator: Shirley Smith Costing Methods Paper Introduction-Absorption vs. Variable Costing In managerial accounting there are two cost methods that can be utilized for the purpose of presenting financial data in a manufacturing environment. They consist of absorption and variable costing methods. Although they are somewhat similar they have key differences that impact a company. In absorption costing the profit is attached to the unit of each item produced. The fixed costs associated in the manufacturing are also considered. This leaves much uncertainty to the actual price to the unit produce. In variable costing the accuracy is much more accepted in managerial accounting. Yet, the fixed costs are not attached the product costing because they change often. The use of these methods has its benefits in accounting; and will leave much to consideration in decision making by many managers working in production. Here as follows are some of those benefits and a possible decision-making consideration that can be beneficial in a low biding by competition in a manufacturing industry. Benefits of the Two Methods According to Articlebase.com in an article titled “Absorption vs. Variable Costing”, there are benefits to each cost methods in accounting. In Absorption costing the benefit of it would be that a company can have an inventory of finished goods. These finished goods are a part of the fixed...
Words: 542 - Pages: 3
...Cost Methods Paper This week’s paper consists of writing about cost methods pertaining to Super Bakery, Inc. This paper will layout the strategies that the management of Super Baker, Inc. used, as well as discuss why management thought it was a good idea to an activity-based costing system into their business. The comparison of a job order cost system and a process order system will be analyzed to decide which would be the best fit for Super Bakery, Inc. Super Bakery, Inc. was founded by ex-National Football League Pittsburgh Steeler play Franco Harris his vision was to provide vitamin, mineral, and protein enriched doughnuts to schools and other institutions. Super Bakery is a virtual corporation, in which only the core, strategic functions of the business are performed inside the company (Darling, October 1996).The main thought about running a company this way was to pull other organizations with expertise in these areas together to reduce the amount of liabilities for facilities, labor, and working capital. The company can claim that this system of outsourcing is working because sales have grown at an average annual rate of approximately 20%. Even though Super Bakery was experiencing some success with the outsourcing at the same time it was proving to be a challenge to the organization in terms related to controlling the costs. The organization started off with a more traditional costing method that simply spread the costs of the operation to every customer. This...
Words: 750 - Pages: 3
...Essays, your source for free research papers, essays, and term paper examples. In this case, would it be better to use the variable or absorption costing method, and why? In the case of the Polk Company, it would be better to use absorption costing method, because it only includes overhead that is allocated to the 80,600 units sold. The absorption costing method will show lower loss to help keep the confidence of the shareholders in the company. Absorption costing will give a true and fair view of the financial position of the Polk Company. The variable method will count fixed overhead as a period expense, such as fixed overhead for this period is calculated on the basis of the 95,500 units that are produced. Using the absorption method will give management a clearer picture of the fishing lures profitability. What are the benefits of the two methods? The benefits of absorption costing are that it recognizes fixed costs in product cost. As it determines the price of the product, and the price based on absorption costing does ensure that all costs are covered. Absorption can provide management with accurate information concerning product cost. The variable method is beneficial by providing an output that is closer to the cash flow of the company that may be short on cash flow. Variable costing aids in the analysis of cost-volume – profit by separating the variable and fixed in the income statement is another benefit. Which method would lead to the best decision when a...
Words: 369 - Pages: 2
...Costing Methods Paper ACC /561 Maurice Guliford Costing Methods Paper ACC /561 Maurice Guliford 2015 2015 After working this problem several times, I feel in this case, it would be better to use the absorption method because this method incorporates only the overhead that is allocated to the 81,300 units sold. The variable method counts fixed overhead as a period expense, meaning that the fixed overhead for this period is calculated on the basis of the 95,400 units produced, if the absorption method is used. The variable method only calculates fixed overhead on the basis of the 81,300 units that were sold. This provides management with a more accurate picture of the profitability of the fishing lures. Thus, the variable costing method is optimal. The ability to provide accurate information to management about product costs is the main benefit of the absorption method. The variable method is beneficial because it provides an output (net income) that is closer to the cash flow of the business. This is useful in particular for businesses that might be short on cash flow. Further, the variable costing method provides management with a clearer picture of the effect that fixed costs have on the total profitability of the company. Absorption costing is particularly useful for firms that do not sell all of their output during the manufacturing period, as is the case with Polk. Under absorption costing, the cost of a good is not shown until the good has been sold. This can be a disadvantage...
Words: 279 - Pages: 2
...Author; Email: popesko@fame.utb.cz Abstract Paper analyses the specifics of the application of Activity-Based Costing method in hospital management. Primary objective of the paper is to outline the methodology of the ABC application in hospitals. First part of the paper analyzes the ways of ABC implementation in published foreign studies. Second part describes the individual steps in ABC application and discusses the differences in the application procedures between the manufacturing and hospital organization. Key words: Healthcare Management, Cost Management, Activity-based costing, Introduction In the last decade, many non-profit and hospital organizations started to face difficulties and challenges in balancing limited resources and costs to provide their demand for services. Due to the introduction of modern medical techniques and medicines and consequent increase of consumed costs, many hospitals are under pressure to adopt more advanced cost management techniques usually utilized only in profit organization sector. Hospital managers frequently seek the advanced techniques, for better understanding of relations between the cost and provided services. One of the key factors of effective company management is ability of accurate estimation of the cost of products. Product costing is an essential economic tool used to quantify the cost of individual interventions carried out. The need for an accurate method of costing in hospital organizations is frequently emphasized...
Words: 3077 - Pages: 13
...COSTING METHODS PAPER Super Bakery Inc. ACC/561 March 28, 2012 Deborah Adkins COSTING METHODS PAPER Super Bakery Inc. The costs of a company can be classified according to different criteria. Depending on the method we have Direct, indirect, Fixed and, Variable costs. There are also costs that have a mixed nature: they can be semi-fix or semi-variable. And of course the costs that as already incurred on or are still pending which are Potential and, incurred costs. The same way there are different methods of costing that every industry fallow to establish the cost of their products depending on the nature of their products and the type of organization. Some of the most important or most used methods of costing are: job, contract, batch, process, service and operation costing there is also a method call Activity Based Method or ABC which one of the most important management innovations of the last hundred years and considered a new method for defining the costs of products and services. Under this new methodology, the bases used in the determination of indirect costs and some administrative costs are units of measure determined by the most significant operational activities undertaken during the production process. In the case of Super Bakery “a virtual, nationwide supplier of mineral, vitamin and protein enriched baked goods to the institutional food market” (John Wiley & Sons, 2009). The company needed to coordinate and regulate many functional activities...
Words: 468 - Pages: 2
...ACC 561 Accounting Week 1 to 6, Assignment, WilyPLUS, DQ, Final Purchase here http://homeworkonestop.com/ACC%20561/acc-561-accounting-week-1-to-6-assignment-wilyplus-dq-final Product Description ACC 561 Accounting WEEK 1 Individual Assignment, Financial Statement Review Paper Individual Assignment, Wileyplus BE1-7, BE1-8, BE1-9 Discussion Question 1 and 2 WEEK 2 Individual Assignment, Sarbanes-Oxley Act of 2002 Individual Assignment, Wileyplus E13-5, E13-6, E13-8, E13-9 Learning Team Summary Learning Team Reflection Discussion Question 1 and 2 WEEK 3 Individual Assignment, American Corporation Analysis Individual Assignment, Wileyplus BE15-5, E16-1, E17-9 Discussion Question 1 and 2 WEEK 4 Individual Assignment, WileyPLUS BYP17-2 Managerial Analysis Individual Assignment, Wileyplus BE18-1, BE18-7, BE18-11, E19-2 Learning Team Summary Learning Team Reflection Discussion Question 1 and 2 WEEK 5 Individual Assignment, Costing Methods paper Learning Team Assignment, CVP and Break-Even Analysis Paper Individual Assignment, Wileyplus E20-2, E20-5, BE21-4, E22-5 Learning Team Deliverable Discussion Question 1 and 2 WEEK 6 Individual Assignment, Wileyplus E23-1, E23-2 Learning Team Summary Learning Team Reflection ACC 561 Final Exam WileyPLUS (30 Q & A) ACC 561 Final Exam 2 (30 Q & A) ACC 561 Final Exam 3 (54 Q & A) ACC 561 Final Exam 4 (54 Q & A) ACC 561 Final Exam 5 (54 Q & A) ACC 561 Final Exam 6 (52 Q & A) ACC 561 Final Exam 7 (45...
Words: 4411 - Pages: 18
...Costing Methods ACC561 - Accounting Michael Gaspar, CPA Costing Methods In every business, management needs to have a way to track their costs. These costs can be related to production, inventory, shipping, or overhead. There are many different ways for management to track these changes. Management can choose between traditional costing methods, job order costing system, process order cost system, and activity based costing. In our example, Super Bakery chooses to change their costing method to activity based costing to track their profit margins. In this paper, we will examine the strategies used by Super Bakery, reasons for changing to an activity based costing method, and if another costing method would have been a better choice. Strategies used by Super Bakery Inc. Unlike many production based organizations that produce all products in house as well as operate their sales division in house, Super Bakery contracts other organizations to sell, manufacture, warehouse, and ship the products under the Super Bakery name. By doing this, Super Bakery is able to keep its overhead low and continue to make a profit on their products. The other organizations incur the employee wages, machinery costs, and other expenses which are not billed to Super Bakery. Super Bakery can have four different companies handle the majority of operations, and they sit back and receive the profit. Why was it necessary to install an ABC system? Prior to installing an activity based costing...
Words: 632 - Pages: 3
...CONFIDENTIAL UNIVERSITI KUALA LUMPUR BUSINESS SCHOOL FINAL EXAMINATION SEPTEMBER 2013 SEMESTER SUBJECT CODE : EAB10603 SUBJECT TITLE : MANAGEMENT ACCOUNTING 1 LEVEL : BACHELOR TIME / DURATION : 2:00 – 5:00 PM / 3 HOURS DATE : 12TH JANUARY 2014 INSTRUCTIONS TO CANDIDATES 1. Please read the instructions given in the question paper CAREFULLY. 2. This question paper is printed on both sides of the paper. 3. This question paper consists of TWO (2) sections; Section A and section B. Answer ALL questions. 4. Please write your answers on the answer booklet provided. 5. This question paper must not be removed from the examination hall. THERE ARE FIVE (5) PAGES OF QUESTIONS, EXCLUDING THIS PAGE. CONFIDENTIAL SECTION A (Total: 20 marks) Question 1 A. Discuss THREE (3) major differences between financial accounting and management accounting. (6 marks) B. Aishah works at Tulus Furnitures, a factory involves in rattan furniture at Nilai. Explain the meaning of the following terms. Support your answer with TWO (2) examples of each cost that are commonly incurred by Tulus Furnitures: i. period cost ii. product cost (6 marks) C. Explain the meaning of each of the terms and provide example of each of the categories: i. fixed costs ii. variable cost iii. semi fixed costs iv. semi variable cost. (8 marks) [20 marks] EAB10603_Management Accounting...
Words: 794 - Pages: 4
