...Costing Methods ACC/561 March 12, 2012 Monique Smalling Super Bakery Super Bakery is a virtual company that handles only core functions of the business while all other aspects are outsourced. Even though the bakery became a leader in the institutional baked goods market the company had reoccurring issues containing costs and ensuring the quality of their products. The management team at Super Bakery decided to implement and activity based costing plan to help maximize profits and ensure quality products to customers. However, Super Bakery had an additional challenge when implementing a cost system. Because the majority of functions are outsourced, the costing plan needed to help the company maintain control over those outsourced functions Strategies In order to make a costing system functional in a virtual company, Super Bakery needed to put into place several strategies that would cater to the specific virtual challenges. The first simple strategy that was put into place by Super Bakery was simply to question industry practices and to develop unique strategies and tactics (Davis & Darling, 1996). When management asked these questions they discovered that there was a market that traditionally received poor and underrated service; the school systems and institutional food market. The bakery developed healthy baked goods to meet the ever-increasing nutritional standards that government run facilities faced. This strategy allowed the company...
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...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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...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...
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...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...
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...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...
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...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...
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...Costing Methods Strategies Used By Super Bakery Inc. Super Bakery Inc. was a virtual corporation preferring to outsource its main business applications. This was with a view of minimizing the cost of operation relative to its income levels. By outsourcing, Super Bakery could control the flow of the activities that yielded its revenue. This was without necessarily acquiring to take the immense responsibility of bearing the risks involved with each stage of production and transaction. This explains the realization of its goal in reduction of expenses. Otherwise, it would incur the expenses through the acquisition of relevant assets for the various processes involved. These processes include machinery for production of the different products, maintenance of these machines as well as their replacement whenever that need came up and the costs of production. Examples of costs of production include the cost of raw materials and other inputs as well as overhead costs such as the cost of electricity, water, salaries and wages for the greater number of employees who would have to be directly and indirectly involved in the process (Staubus, 1971). Costs of transportation of inputs as well as finished products to the various distribution points is also eliminated, as is the costs of storage of raw materials and finished products before transportation to the target market (Horngren & Foster, 2003). Super Bakery employed the traditional costing methods that relied on listing of the costs...
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...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...
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...Costing Methods Paper ACC/561 July 1, 2012 Costing Methods Super Baker previously used the traditional costing system to manage its cost management. Super Bakery changed its business strategy to an Activity-Based Costing system, to identify at the activities associated with each order. Because Super Bakery outsources its business operation, an Activity-Based Cost system would be beneficial to track effectiveness of each vendor. Activity-Based Costing strategic gives the company detailed information of its operational performance to adjust the strategic planning for better profit margins (Kimmel, Weygandt, & Kieso, 2009). Activity-Based Costing System Super Bakery management installed the Activity-based system because the traditional costing system was not effective tracking the profit margin for the company expenditures. Super Bakery has an elevated overhead cost because of the numerous outsources entities used. The Activity-Based Cost system is used to monitor the activities of each vendor and the process of manufacturing, and distribution. Understanding that overhead costs represent a dominate portion of total costs, Kimmel, Weygandt, and Kieso (2009) state Activity-Based Cost leads to more cost pools used to assign overhead costs to products. Activity-Based Cost is effective for controlling of overhead costs, and monitors costs direct or indirectly involved in product activity. Activity-Based Cost is an important factor in management decisions that are dependent...
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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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...Costing Methods Paper The Super Bakery Case Paula Mack-Days ACC 561 June 4, 2012 Professor William Montgomery Costing Methods Paper Super Bakery used four defined strategies and they are 1) successful in changing the school’s decision of removing donuts from the lunch menu and supply the cafeterias with the Super Donut, a low-calorie and vitamin-enriched donut; 2) provided refrigerated baked goods and changed to national distribution; 3) outsourced to independent contractors which would eliminate the need for a facility that house a full administration staff that would require compensation and benefits; 4) increased service to aid in obtaining/creating proper documentation to meet food regulations mandated by the government and customer support to strengthen relationships with noncompeting suppliers. The management of Super Bakery used activity based costing (ABC) system to monitor and control costs. This virtual organization is not a traditionally run business but has performed effectively with the use of this special costing model. This type of organization outsourced selling, manufacturing and shipping, hired a master baker & regional sales managers, and formed credit and collections group. Super Bakery’s management thought it was best to install an ABC costing system because they believed that the traditional systems didn’t clearly define any differences in the real cost. The primary focus of the ABC costing system in measuring costs at the Super Bakery...
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...Costing Methods: Super Bakery ACC 561 Costing Methods: Super Bakery, Inc. Super Bakery, Inc. has a strategy in place that is in place to add maximum value to the company all the while making investments that are minimal. The company initiated an outsourcing strategy; instead of a multifunctional organization by taking activities that were selling, manufacturing, warehousing, and shipping. The outsourced companies will be combined and this will allow for a more organized work flow (Kimmel, Weygandt, & Kieso, 2009). The managers and employees at Super Bakery, Inc. thought it was a good idea to implement an activity-based costing system (ABC). This system would create a tracking system that would be more accurate on dealing with the costs in each order. By using the ABC system Super Bakery are hoping to improve their pricing and also has different customers that are located around the country (Kimmel, Weygandt, & Kieso, 2009). In my opinion the activity-based costing system is the best system that was chose by Super Bakery. The ABC system uses unit costs and not total costs, by choosing this method; it will show the costing system a little better. Super Bakery can use the ABC system as a way to track the costs of their products they have to suppliers and distributors. This company believes that because of these reasons this chosen system will work and be effective. A job order cost system and a process order...
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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...
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...Management of Super Bakery Inc. University of Phoenix Online/ACC561 December 17, 2012 ABC and Management of Super Bakery Inc. Franco Harris is a former running back. He played for the Steelers and now owns the Super Bakery Inc. Company. This company supplies schools with baked goods like donuts that are vitamin and protein enriched. Super Bakery Inc. is a virtual company. Management Strategies Being a virtual company Super Bakery Inc. has few functions inside the company. The others like warehousing and shipping are outsourced keeping Super Bakery Inc.’s main function to organize the workflow. By doing this Super Bakery Inc. kept machinery and inventory expenses low and has been able to grow an average of twenty percent a year. One major drawback to outsourcing is maintaining relationships with other companies to fulfill the outsourced functions. One advantage of this is “adding maximum value to the company while making the minimum investment in permanent staff, fixed assets, and working capital.” (Kimmel, Weygandt, & Kieso, 2009) The ABC System Activity Based Costing helps to assign resource costs through activities to the products and services. This tool is usually used for understanding product and customer cost and profitability based on the production. ABC is used to support strategic decisions like outsourcing. Traditional costing methods were not working for Super Bakery Inc. Because they are nationwide there is a large cost difference in the...
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...Costing Methods Paper Erica Rice ACC/561 18 February 2013 Edward Hastings Costing Methods Paper What strategies did the management of Super Bakery, Inc. use? Super Bakery’s challenges are to control cost by reducing the overhead for serving their customers in different parts of the country, and by doing this they can use the ABC method; Activity-Based Costing System to enhance control over overhead costs and under ABC, the company can trace many overhead costs directly to activities by allowing some indirect costs to be identified as direct costs like the customer’s order cost for every individual customer that seems to be the same amount. The managers can become more aware of their responsibility to control the activities that generate those costs. The second reason that Super Bakery’s went with ABC was because of trying to control cost in the business part of the company like, manufacturing, sales, warehousing, and shipping. By taking control of the product cost this should contribute to settling selling prices that can help them achieve desired product success. With a more precise cost data the managers could decide on whether to buy or make a product part or piece, and whether to remove a product. ABC helps the managers to minimize the amount of overhead that is payable to their product. If the overhead is payable based upon the amount of direct labor used, then the managers can minimize the amount of overhead payable to their product by minimizing the amount of...
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