...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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...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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...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 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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...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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...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...
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...Elliott Super Bakery, Inc. Introduction Former Pittsburgh Steelers running back Franco Harris opened a virtual corporation called Super Bakery, Inc., in 1990 (Kimmel, Weygandt, & KIesco). Super Bakery, Inc. supplies minerals, vitamins, and protein-enriched donuts and baked foods to schools, and certain food markets. Since Super Bakery Inc. is a virtual company they keep all core functions of the company within the business. This allows them to outsource such functions as, selling of products, manufacturing, warehousing, and shipment of products. Strategies Super Bakery, Inc.’s management team developed a strategy to save on costs by outsourcing most of the functions within the company. By doing this, they can save money by allowing an outside company to handle some of the day-to-day functions like shipping products, and the selling of the products, by use of call centers located overseas. This can help control the flow of the activity within the company. Another strategy that Super Bakery, Inc. decided to implement was the ABC System within the company. With various clients it was hard for management to keep up with the exact amount of outsourcing activities. Some companies may have been paying a cheaper or a higher price for the product. ABC System will keep track of this information so it can be accurate and up to date. ABC System (Activities Based Costing) ABC System is known to be a most effective system. ABC System method helps Super Bakeries, Inc...
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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 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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...Writing Assignment #2 1. Briefly describe the ABC system adopted in Super Bakery. Super Bakery cannot simply use a standard costing system. The reason is because using a standard costing system allocates expenses to products and then spreads them over the entire customer base. Thus, each customer's order is assumed to cost the same average amount to process. This is a problem for Super Bakery because customer’s orders do not consume the same amount of resources and has difference profitability. Super Bakery adopted an ABC system that’s main focus is placed on capturing actual costs directly by a customer order rather than by product. Overhead service expenses are high and variable, while contracted manufacturing costs are fixed. To get a more accurate cost of order processing for each customer, Super bakery assigns cost based on the number of orders that have to be processed. By assigning costs accurately to each customer, the company can see the profitability of different customers. Super Bakery assigns direct costing by either historical cost or using a cost driver. Historical cost has been collected over many years on serving particular customers. However, when historical cost is not available, a cost driver is effective. 2. Do you think it is necessary to adopt an ABC system in Super Bakery? Why or why not? What are the benefits/costs? I definitely think it is necessary to adopt an ABC system in Super Bakery because it is a virtual corporation. It outsources...
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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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...COSTING METHODS Costing methods for Super Bakery University of Phoenix ACC/561 December 19, 2011 Timothy W. Williams, Ph.D. Costing methods for Super Bakery Super Bakery is a virtual corporation created in 1990 by Franco Harris, developing a network of supply for “donuts and other baked goods aimed for the institutional food market” (Kimmel, et al, 2009, pg 867). According to Kimmel, et al (2009), “only the cores, strategic functions of the business are performed inside the company. The remaining activities, selling, manufacturing, warehousing and shipping are outsourced to a network of external companies,” (p.865). Management Strategies The current management strategy was job order based upon the outsourcing of the jobs. While the company was realizing a 20% annual growth rate, management still found that the current system was allowing a wide variation in cost control. (Kimmel, et al, 2009, pg 865).When it was noticed that “orders with high margins were subsidizing orders with low margins” (Kimmel, et al, 2009, pg 867), in the current strategy, the need for a new strategy became apparent. The move to an activity based costing system (ABC) that will show the costs produced by each activity performed rather than the job appears to be the correct choice. Managements Installation of ABC Super Bakery Inc will benefit from the implementation of the ABC system because the costs are tracked by each account in conjunction with performance...
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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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...tactics did Super Bakery’s management implement that caused sales to take off and continue to grow at an average rate of 20%? There were basically four strategies implemented that helped sales to grow annually at a 20-30% rate. The first was targeting school systems and creating a healthier product that met government guidelines. The second was keeping the product fresher; longer by refrigeration and vacuum sealing thus allowing for national distribution. The third strategy involved a variety of ways to support customers. According to Davis and Darling (1996), “ …helping customers obtain lower prices by acquiring government-supported commodities, cooperating with noncompeting suppliers by providing complete prepackaged meals to schools, and helping distributors reduce inventory carrying costs and avoid stock outs through reliable, just-in-time delivery” (p. 20). The fourth strategy is becoming a virtual corporation which does not manufacture, sell, or distribute the company’s product (Davis & Darling, 1996). This helps to reduce expenses and capital investments, keeping internal staff to a minimum. b) Why did Super Bakery’s management feel that it was necessary to install an ABC system? A major hurdle Super Bakery’s management had to face was controlling the functions outside of the company. Quality and cost were of major concern when outsourcing sections of the manufacturing and distribution process. A standard costing system would not provide accurate costing for each...
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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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