The Use of Cost Accounting Systems for Aunt Connie's Cookies
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RUNNING HEAD: The Use of Cost Accounting Systems for Aunt Connie’s Cookies
The Use of Cost Accounting Systems for Aunt Connie’s Cookies
ACC/561
University of Phoenix
January 28, 2010
Aunt Connie’s Cookies is a family owned company that prides itself in the production of quality cookies. As with many other production companies, there is a correlation between the price paid for the cookies and the demand of the cookies. There is an inverse relationship between these two factors. The higher the price charged for the cookies the lower the demand is and vice-versa. Also, there has recently been an opportunity to purchase a manufacturing plant and expand their operations. The executives at Aunt Connie’s Cookies are in desperate need of assistance. The goal in this situation is to find the cost to be charged per cookie that is most profitable for the company and to determine if expanding their operations would be a beneficial choice.
One common accounting method that is used to help make these types of decisions is called a cost accounting system. Cost accounting systems are used to help establish the cost of a product, service, customer, or other cost object. The cost accounting system typically includes two processes: cost accumulation and cost assignment. Cost accumulation is the act of “collecting costs by some “natural” classification, such as materials or labor, or by activities performed such as order processing or machine processing” (Burgstahler, Horngren, Stratton, Sundem, & Schatzberg, 2008, p. 138). Cost assignment is the act of “Attaching costs to one or more cost objects, such as activities, processes, departments, customers, or products” (Burgstahler, Horngren, Stratton, Sundem, & Schatzberg, 2008, p. 138).
In previous years, many companies used traditional cost accounting systems. This method of accounting does not account for or include the costs of activities or processes. Often times, for all indirect manufacturing costs they...
The Use of Cost Accounting Systems for Aunt Connie’s Cookies
ACC/561
University of Phoenix
January 28, 2010
Aunt Connie’s Cookies is a family owned company that prides itself in the production of quality cookies. As with many other production companies, there is a correlation between the price paid for the cookies and the demand of the cookies. There is an inverse relationship between these two factors. The higher the price charged for the cookies the lower the demand is and vice-versa. Also, there has recently been an opportunity to purchase a manufacturing plant and expand their operations. The executives at Aunt Connie’s Cookies are in desperate need of assistance. The goal in this situation is to find the cost to be charged per cookie that is most profitable for the company and to determine if expanding their operations would be a beneficial choice.
One common accounting method that is used to help make these types of decisions is called a cost accounting system. Cost accounting systems are used to help establish the cost of a product, service, customer, or other cost object. The cost accounting system typically includes two processes: cost accumulation and cost assignment. Cost accumulation is the act of “collecting costs by some “natural” classification, such as materials or labor, or by activities performed such as order processing or machine processing” (Burgstahler, Horngren, Stratton, Sundem, & Schatzberg, 2008, p. 138). Cost assignment is the act of “Attaching costs to one or more cost objects, such as activities, processes, departments, customers, or products” (Burgstahler, Horngren, Stratton, Sundem, & Schatzberg, 2008, p. 138).
In previous years, many companies used traditional cost accounting systems. This method of accounting does not account for or include the costs of activities or processes. Often times, for all indirect manufacturing costs they...