...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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...WEEK 2 Written Assignment Case 3A (Auerbach Enterprises) Discussion 1, Product Costs Discussion 2, Job Order Costing vs. Process Costing WEEK 3 Written Assignment Case 5A (Glaser Health Products) Discussion 1, Allocating Joint Costs Discussion 2, Variable/Absorption Costing WEEK 4 Written Assignment Case 6B (Chester & Wayne) Discussion 1, Budgeting Comments Discussion 2, Standard Cost System Journal Budgets and Employee Morale WEEK 5 Discussion 1, Capital Investment Evaluation Discussion 2, Ranking Investment Alternatives Written Assignment Case 9A (Middlehurst House) WEEK 6 Final Paper, Analyze the Role of Managerial Accounting Discussion 1, Evaluating Performance Discussion 2, Non value- Added Costs in a Doctor's Office BUS 630 Managerial Accounting Entire Course Week 1 to 6 Purchase here http://homeworkonestop.com/BUS%20630/bus-630-managerial-accounting-entire-course-week-1-to-6 Product Description BUS 630, Managerial Accounting WEEK 1 Written Assignment, Case 2B (Mendel Paper Company) Discussion 1, Ethics in Cost Control Discussion 2, Fixed and Variable Costs WEEK 2 Written Assignment Case 3A (Auerbach Enterprises) Discussion 1, Product Costs Discussion 2, Job Order Costing vs. Process Costing WEEK 3 Written Assignment Case 5A (Glaser Health Products) Discussion 1, Allocating Joint Costs Discussion 2, Variable/Absorption Costing WEEK 4 Written Assignment Case 6B (Chester & Wayne) Discussion 1, Budgeting Comments Discussion...
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...Group Case Project: Absorption Costing vs. Variable Costing Javkhlantugs Altansukh Ana Barrios Cameron R. Bates Kyle Brown Absorption Costing Absorption costing is a costing system in which the direct labor, direct materials, and fixed and variable manufacturing overhead costs are traced to every finished product. Thus, in the absorption costing system, all costs are product costs regardless of their classification of variable or fixed. Because of its characteristic of no cost discrimination, absorption costing is also known as full costing or as full absorption method (¨Absorption¨ 1). The absorption costing is the only method approved by the generally accepted accounting matching principle (GAAP). Thus, it is required by law to use this system for external financial statements (Lohrey 1). The absorption costing also provides accuracy of the calculation in taxes reporting (1). Experts say that the absorption costing method provides a complete picture of cost calculation and it is helpful to accurately track profit during an accounting period (Cunagin 1). In fact, this method is in compliance with the GAA matching principle which states that all expenses and revenues must be reported in the same period (Lohrey 1). Production Process A simplified production process starts with the purchase of direct materials and ends with the sale of the finished goods. To account this process the following steps should be made. When the direct materials are purchased, they...
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...Management: Plan, Direct and Control Product cost vs Period costs Product costs: Direct materials, Direct labor, MOH Manufacturing Costs: COGS Manufacturing Schedule * Beginning FG Inventory + Cost of Goods Manufactured – Ending FG Inventory = COGS * Cost of Good Manufactured = Beg WIP + Total Manufacturing Costs = Total Cost of WIP * COG Manufactured = Total Cost of WIP – Ending WIP * PG 13 for illustration Chapter 2 Job order costing: assigning of costs to each job or to each batch of goods. Process costing: manufacturing large volumes of similar products. (accumulates cost for a period of time) Objective of both cost accounting systems is to provide unit cost information for pricing, cost control, inventory evaluation and financial statement presentation. Companies accumulate then assign manufacturing costs. Revisit pages 46-47. Assign MOH to WIP and to specific jobs on as estimated basis through the use of a predetermined OH rate. The predetermined OH rate is based on the relationship between estimated annual OH costs and expected annual operating activity, expressed in terms of a common activity base. ( Estimated Annual OH Costs/ Expected Annual Operating Activity = Predetermined OH rate) Refer to pages 51-52 Refer to summary on page 55 Refer to page 58 (advantages and disadvantages of job order costing) Refer to page 60. Chapter 3 Similarities between job order costing and process costing: * Manufacturing cost elements: Dm, DL, MOH ...
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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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...Course Objective: Management accounting information system is designed to satisfy three broad objectives (1) To provide information for costing out products and services, (2) To provide information for planning, controlling, evaluation, and continuous improvement, and (3) To provide information for decision making. The purpose of the course is to learn the fundamental concepts and procedures necessary for the understanding and use of management accounting information for managerial decisions. The emphasis is on the use of accounting information. Effective management requires a sound understanding of how to use accounting information for decision making. The following topics will be discussed: Major differences between Financial and Managerial Accounting Ethical standard for management accountants Cost terminology and concepts Cost objects, cost flows in manufacturing or services operations. Job order costing and process costing Activity based costing and management Cost behavior and analysis—absorption vs. variable costing, cost driver analysis, statistical cost estimation, CVP analysis using contribution margin approach. Profit planning and budgeting Cost analysis for tactical decision making Standard costing and analysis Cost analysis for performance measurement and evaluation Relevant costs for short-run...
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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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...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, under applied FOH. Ch 12,13,Book 1 B Accounting for mass customization operation: Manufacturing cost flow • Product cost and service industries • Different costs for different purposes Ch 2, Book 3 B Product costing and cost accumulation in a batch production environment: • Types of product costing system, • Accumulating cost on job order costing; two stages cost accumulation, •...
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...Systems Design: Process Costing Similarities Between Job-Order and Process Costing • Both systems assign material, labor and overhead costs to products and they provide a mechanism for computing unit product cost. • Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods. • The flow of costs through the manufacturing accounts is basically the same in both systems. Differences Between Job-Order and Process Costing • Process costing is used when a single product is produced on a continuing basis or for a long period of time. Job-order Jobcosting is used when many different jobs are worked on each period. • Process costing systems accumulate costs by department. JobJob-order costing systems accumulated costs by individual jobs. • Process costing systems use department production reports to accumulate costs. Job-order costing systems use job cost Jobsheets to accumulate costs. • Process costing systems compute unit costs by department. JobJob-order costing systems compute unit costs by job. Quick Check Process costing is used for products that are: a. Different and produced continuously. b. Similar and produced continuously. c. Individual units produced to customer specifications. d. Purchased from vendors. Quick Check Process costing is used for products that are: a. Different and produced continuously. b. Similar and produced continuously. c. Individual units produced...
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...20 PROFESSOR: SALVADOR CARMONA □ Ph.D (Accounting). Universidad de Sevilla. □ Last version, November 2006 COURSE DESCRIPTION A cost accounting system collects and classifies costs and assigns them to cost objects. The goal of a cost accounting system is to measure the cost of designing, developing, producing (or purchasing), selling, distributing, and servicing particular products or services. Cost allocation is at the heart of most accounting systems. Cost behavior -how the activities of an organization affect its costs- is also fundamental to cost accounting systems. The data provided by a cost accounting system is used for various purposes, which include product costing, planning and control, and decision making. This course mainly focuses on the first of these objectives -products costing. COURSE GOALS Students, as future managers, will utilize, at a minimum, the output of cost systems, which are the primary internal information systems in a firm. Students taking this course will gain an understanding of cost accounting systems, which includes a familiarization with: The goals of cost accounting systems; the fundamental features and design of cost accounting systems; and the various uses of the data provided by cost accounting decisions. A sound understanding of these issues is necessary to interpret cost accounting system outputs; to transform them from data to information and knowledge. Without this understanding, cost accounting data is often mis-interpreted...
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...SYSTEMS DESIGN: JOB ORDER COSTING Key Terms and Concepts to Know Job-Order Costing vs. Process Costing Job-order costing is used for companies that produce different products each period. Costs are accumulated for each job. Process costing is used for companies that produce many identical units of a single product for long periods of time. Costs are accumulated by manufacturing department. Key Job-Order Costing Documents Material requisitions request materials for production and support direct materials costs charged to each job. Time cards or time tickets record direct labor hours used in production and support direct labor costs charged to each job. Job cost sheets are the most important job costing document. They summarize all of the key information about the job and accumulate total direct materials costs, total direct labor costs and overhead costs applied to the job to determine the total costs for the job. Actual Manufacturing Overhead vs. Manufacturing Overhead Applied Actual manufacturing overhead costs are the indirect manufacturing costs incurred in the production process. Manufacturing overhead applied are the overhead costs added or applied to each job during the production process. These costs are added to work-in-process to become part of total manufacturing costs along with direct materials and direct labor. Page 1 of 24 Revised Fall 2012 Key Topics to Know Choosing a Cost System Job-order costing is used by companies...
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...Kurt Meyer 9/12/14 Comparison between Absorption Costing vs Variable Costing Questions: 1) In this case, would it be better to use the variable or absorption costing method, and why? Variable Costing would prove to be less expensive: Manufacturing Cost per unit: Absorption is $18.71 Variable Cost $16.17 Variance is $2.54 more with Absorption Reason - under Absorption Costing fixed Manufacturing OH are a product cost and under Variable costing it is a period cost and so it is expensed. The data from Week 5 assignment 19-17, each unit sold and each unit still in inventory is an amount paid under absorption costing. 2) What are the benefits of the two methods? Absorption-Assigned cost per unit in inventory has a value that’s part of the fixed overhead; expense is shown when item is sold, this can improve your profits for this period when you do not sell all of your products. Variable-Shows all the expenses have been paid for this accounting period, although you have not received revenue for some in inventory, this will show as surplus income once you finally sell. 3) Which method would lead to the best decision when a competitor is submitting a lower bid for your product? Variable costing would be the best decision when competitors come with a lower bid for your product. Net Income under variable costing changes is sales levels not production levels; provides a...
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...financial leverage, capital structure, etc; Cash and liquidity, credit and inventory management; International corporate finance; Risk management and financial engineering; Options and option valuation; Mergers and acquisitions 2. Accounting for Financial Statements: Preparation of income statement, balance sheet and statement of cash flows: Accounting for specialized items: Property, Plant & Equipment, bad debts; provisions; financial instruments; leases; employee benefits; income taxes; revenues,; foreign currency transactions etc.;Accounting for mergers and consolidations; IFRS vs GAAP; Financial statement analysis 3. Cost and Management Accounting: Cost concepts; Job-order costing vs process costing;ABC Costing; Marginal costing vs absorption costing: CVP analysis; Relevant costs: special order, make or buy decisions; ROA, residual income and economic value added; Standard costing and variance analysis; EOQ and linear programming 4. Quantitative Methods and Business Mathematics: Algebra and logarithm; Series and progressions; Probability, confidence intervals and testing; Measures of central tendency and measures of dispersion; Simple and compound interest: compounding and discounting;Differentiation and integration; Regression and correlation 5. Business Management: Vision, mission and strategy; Human resource management : recruitment and retention, performance measurement and development,...
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...Job Costing: A Few Observations Understanding activities and processes is fundamental to modern management accounting. When you complete your study of material in this chapter, you should be able to: • . Take a factual situation and calculate a product's indirect cost. • . Discuss the shortcomings of the traditional approach and how products may be miscosted using such an approach. • . Take a factual situation and trace the flow of costs for a product using T-accounts; also, take the same situation and make the necessary journal entries. • . Given a data set, calculate a manufacturing firm's predetermined overhead rate. • . Determine when a firm has an overhead variance and discuss the implications of underapplied and overapplied overhead (both material and immaterial. • . Discuss actual and normal costing. Why Product Cost Information Is Developed Firms need good cost data for: • External reporting -- This has been primary focus, even though it is of only minor importance for most internal decisions. Financial reports are full of estimates. Also, in many publicly traded companies, so much of the accountants' time is invested in compliance reporting (providing reports to the SEC, IRS, etc.,) that little time remains for 1 addressing internal accounting needs. • Pricing decisions Cost plus requires knowledge of cost. Bids for jobs require understanding of what a job will cost. Management control Are costs what they should be? If I plan to spend $3,000 and spend $4,000, I need...
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...Management Accounting and Control Lecture 4: Cost system refinement: Activity‐based costing; Process Costing Reading: Horngren Chapter 7 (Ch 5 in 14th edition); and Ch 8 to p 276 and pp281‐283 (Ch 17 14th edition) Note: the FIFO method will not be examined in this course and nor will Hybrid (Operation) Costing , therefore you do not need to read the pages that relate to these topics. 1 Salters Pty Ltd, a specialised equipment manufacturer, uses a job order costing system. The overhead is allocated to jobs on the basis of direct labour hours. The overhead rate is now $2,000 per direct labour hour. The design engineer thinks this is illogical and has stated the following: “Our accounting system doesn’t make any sense to me. It tells me that every labour hour carries additional overhead of $2,000. This means that direct labour makes up only 5% of our total product cost, yet it drives all our costs. In addition, these rates give my design engineers incentives to ‘design out’ direct labour by using machine technology. Yet over the past years as we have had less and less direct labour, the overhead rate keeps going up and up. I won’t be surprised if next year the rate is $2,500 per direct labour hour. I’m also concerned because small errors in our estimates of the direct labour content of a job can have a large impact on our estimated costs. Just a 30 minute error in our estimate of assembly time is worth $1,000. Small mistakes in our direct labour time estimates can really swing our bids ...
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