Aunt Connie's Cookies
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Aunt Connie's Cookies
Nick Blodgett
Accounting
June 07, 2011
Aunt Connie's Cookies
Aunt Connie’s Cookies started in 1986 when a small club requested a 500 unit batch of Connie Rocha’s lemon crème cookies, and offered her $50 as payment. Connie requested that she make them 600 cookies for $55. The reasoning for the request was that her ingredient costs were $35 for everything she needed to make the cookies and $10 per 300 baked in her oven. So regardless if she made 500 or 600 she would be spending $55 total. This brilliant accounting spun into a now successful cookie business run by her grandniece Maria Villanueva. What I will be discussing here are the positive effects a cost accounting system can have on Aunt Connie’s Cookies profit margins.
A cost accounting system is defined as; “The techniques used to determine the cost of a product, service, customer, or other cost object” (Horngren, 2008). The cost accounting system has to provide cost information in a timely and efficient matter so that management, like Maria, can make decisions about which products to make, in what volumes, and what prices to charge to maximize overall profits. The cost accounting system is a two step process.
The first step is cost accumulation which is defined as; “Collecting costs by some “natural” classification, such as materials or labor, or by activities performed such as order processing or machine processing” (Horngren, 2008). For Aunt Connie’s cookies this would be things like the costs of all of the ingredients used to create the cookies, the cost of manual labor versus the cost of machine labor, costs of packaging for the cookies, the advertising cost for the cookies, the costs of shipping the cookies, and the costs of direct sales via website or catalog versus selling to third party distributors.
The second step of the process is the cost assignment phase this is defined as; “Attaching costs to one or more cost objects, such as...
Nick Blodgett
Accounting
June 07, 2011
Aunt Connie's Cookies
Aunt Connie’s Cookies started in 1986 when a small club requested a 500 unit batch of Connie Rocha’s lemon crème cookies, and offered her $50 as payment. Connie requested that she make them 600 cookies for $55. The reasoning for the request was that her ingredient costs were $35 for everything she needed to make the cookies and $10 per 300 baked in her oven. So regardless if she made 500 or 600 she would be spending $55 total. This brilliant accounting spun into a now successful cookie business run by her grandniece Maria Villanueva. What I will be discussing here are the positive effects a cost accounting system can have on Aunt Connie’s Cookies profit margins.
A cost accounting system is defined as; “The techniques used to determine the cost of a product, service, customer, or other cost object” (Horngren, 2008). The cost accounting system has to provide cost information in a timely and efficient matter so that management, like Maria, can make decisions about which products to make, in what volumes, and what prices to charge to maximize overall profits. The cost accounting system is a two step process.
The first step is cost accumulation which is defined as; “Collecting costs by some “natural” classification, such as materials or labor, or by activities performed such as order processing or machine processing” (Horngren, 2008). For Aunt Connie’s cookies this would be things like the costs of all of the ingredients used to create the cookies, the cost of manual labor versus the cost of machine labor, costs of packaging for the cookies, the advertising cost for the cookies, the costs of shipping the cookies, and the costs of direct sales via website or catalog versus selling to third party distributors.
The second step of the process is the cost assignment phase this is defined as; “Attaching costs to one or more cost objects, such as...