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Cost Methods of Super Bakery, Inc.
University of Phoenix
Accounting
ACC /561
Professor Karen Lascelle
April 30, 2012
Abstract
Super Bakery, Inc. is a supplier of mineral, vitamin and protein-enriched donuts and other baked foods, primarily for schools throughout the country. The company was founded in 1990 by Franco Harris, a former running back for the Pittsburgh Steelers. Super Bakery was set up as a virtual corporation, only the main functions of the business are performed internally. Manufacturing, storing, selling and shipping functions are outsourced to other companies in an effort to maximize profits with a minimum investment (John Wiley & Sons, 2009).
The following paper will address the management strategies used by Super Bakery, Inc. in attempting to control the costs of the outsourced company’s activities and determine the best suited accounting cost system.
Management Strategies
As a service provider, Super Bakery has faced challenges in attempting to control the costs of the outsourced company’s activities. They service clients all over the United States and noticed that the costs associated with different areas varied to a large degree. To get an accurate accounting of each customer’s order the decision was made to change from the traditional accounting costing system of spreading costs over the entire customer base equally to an activity-based costing (ABC) which allocates costs to multiple cost pools and then assigns the costs to products and services by means of cost drivers(John Wiley & Sons, 2009). To achieve improved management decisions more accurate cost estimates can be made using the ABC.
I am in concurrence with Super Bakery’s management decision to install an ABC accounting system. The traditional accounting approach disperses costs equally to each customer and does not take into account variations due to location or other cost drivers. Using the ABC accounting method management can determine the...
University of Phoenix
Accounting
ACC /561
Professor Karen Lascelle
April 30, 2012
Abstract
Super Bakery, Inc. is a supplier of mineral, vitamin and protein-enriched donuts and other baked foods, primarily for schools throughout the country. The company was founded in 1990 by Franco Harris, a former running back for the Pittsburgh Steelers. Super Bakery was set up as a virtual corporation, only the main functions of the business are performed internally. Manufacturing, storing, selling and shipping functions are outsourced to other companies in an effort to maximize profits with a minimum investment (John Wiley & Sons, 2009).
The following paper will address the management strategies used by Super Bakery, Inc. in attempting to control the costs of the outsourced company’s activities and determine the best suited accounting cost system.
Management Strategies
As a service provider, Super Bakery has faced challenges in attempting to control the costs of the outsourced company’s activities. They service clients all over the United States and noticed that the costs associated with different areas varied to a large degree. To get an accurate accounting of each customer’s order the decision was made to change from the traditional accounting costing system of spreading costs over the entire customer base equally to an activity-based costing (ABC) which allocates costs to multiple cost pools and then assigns the costs to products and services by means of cost drivers(John Wiley & Sons, 2009). To achieve improved management decisions more accurate cost estimates can be made using the ABC.
I am in concurrence with Super Bakery’s management decision to install an ABC accounting system. The traditional accounting approach disperses costs equally to each customer and does not take into account variations due to location or other cost drivers. Using the ABC accounting method management can determine the...