Super Bakery's ABC system
Accounting 561
February 18, 2013
Dr. McDonald

Super Bakery's ABC system Super Bakery is a company founded by former Pittsburgh Steelers, Franco Harris. The company makes mineral-, vitamin-, and protein-enriched doughnuts. This paper will explain the strategies they used and why management found necessary to use Activity-Based-Cost system. The opinion of this writer will explain if agrees or disagrees the implementation. This paper will recommend a costing system and will explain if it will work or not. Super Bakery is a virtual corporation which according to Kimmel, (2008), “a virtual corporation [is] one that consist of a core unit that is supported by a network of outsource activities. A virtual corporation minimizes investments in human resources, fixed assets, and working capital” (p.910). Super Bakery performs strategic functions inside the company. Super Bakery decided to bring together the companies that perform the outsource services. These companies provided the selling, manufacturing, warehousing, and shipping. Super Bakery correlated the work overflow with them. Super Bakery goal is to minimize the spending in fixed assets, permanent staff and working capital and at the same time add value to the company. Bringing these companies together Super Bakery saw an increase of 20% sales since the implementation. Super Bakery challenges was to have control of the outsource services. Management noticed differences of the services throughout the entire outsource system. They also noticed that the traditional costing method used was not given the same result in the entire outsource system. Management noticed orders were costing the same. Management then realized that using such system had to be the reason of why there was a problem in determining the proper allocation of cost with each order. Super Bakery then realized they had to implement a system where they would be able to measure all the cost throughout the entire outsource system. Super Bakery desired to implement a system where they could measure all the services, from “manufacturing, sales, warehousing, and shipping” Kimmel, (2009). Super Bakery chose to use activity-based costing system to measure the activities in where with traditional system appeared to be all the same. Implementing activity-based costing system allowed them to identify hiding measures that otherwise could not be identified, such as the discrepancies of profits and sales all across the outsource system. Super Bakery decision to use activity-based costing system is acceptable for the type of services they offer. Super Bakery have many different companies that are interrelated with each other and each have a different service to perform. Using activity based costing system allows super bakery to identify the costs into pools. Activity-based cost system allows them to determine the nature of the activity as well on how to apply it to each service. Super Bakery using activity-based costing system will allow to group the activities into pools by: units, batches, products and at the facility level. Super Bakery benefits using activity based costing in where according to Kimmel (2009), allocates overhead to multiple activity cost pools, and assigns the activity cost pools to products or services by means of cost drivers. Super Bakery could not use process cost system because cost are allocated to similar products and the costs are allocated by department, And in job order cost systems costs is assign to each job (Kimmel, 2009). In job costing under and over applied overhead arises in where assume data is used (Nurre, 2009). Such assume date would not meet the need of Super Bakery and the need for allocating all services. In conclusion, Super Bakery using activity-based costing system fulfills management goal “to add maximum value to the company while making the minimum investment in permanent staff, fixed assets, and working capital” Kimmel, (2009). The use of activity based cost system gives management the ability to redistribute and accumulate costs by the use of activities in the appropriate department. The usage of activity-based system will allow Super Bakery determine the appropriate overhead to all services.

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References
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Accounting: Tools for business decision making (3rd ed.). Hoboken, NJ: John Wiley & Sons
Kimmel, P.D. Weygandt. J.J. & Kieso.D.E. (2008) Accounting: Tools for business decision making (4th ed.). Hoboken, NJ: John Wiley & Sons. Retrieved from: http://books.google.com/books?id=vol37b8_lLEC&pg=PA199&dq=what+is+a+virtual+corporation&hl=en&sa=X&ei=3q4eUZzPO6irigLv74DgCA&ved=0CFAQ6AEwBA#v=onepage&q=what%20is%20a%20virtual%20corporation&f=false
Nurre, R. (2009, August). Accounting 101. Retrieved from: http://www.smccd.edu/accounts/nurre/online/chtr3.htm