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.
- Submitted by: brew1212
- Views: 559
- Category: Other
- Date Submitted: 04/12/2013 11:49 AM
- Pages: 2
- Report this Essay
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.
In 1990 Super Bakery Inc. was created in Pittsburgh, Pennsylvania. The company’s goal was to provide great enriched baked goods to its customers while outsourcing a lot of the work to keep down the overhead cost. At the start of the company they were analyzing their expenses through the use of traditional costing system but through the evaluation of how cost broke down and customers were being charged, found that they needed to make a change. The direction that Super Bakery Inc. felt they should go in was to change their cost system to an activity-based costing system.
Making the change in cost system was a big step in the right direction for the company. They were dividing all costs between customers equally with the traditional system and found that there were other ways to make more profit by distributing the cost. Super Bakery Inc. does not have a large staff base due to the fact they outsource all but the key strategic functions of the business. Traditional cost system has its focus set more on direct labor cost while activity-based system focus on the cost associated with each process along the way to being shipped to the customer.
With the change in how companies conduct business, including Super Bakery Inc., it is clear that making the move to the activity based cost system was the best business move for them. The new system allows the company to look at what resources and the amount of them that are needed to fill each customer’s order and more appropriately breakdown the price for their customers so that they would receive equal profit from each order that they filled. The change will also allow the company to note where they could cut cost and increase their income and remain a competitive factor in the baked good services...
In 1990 Super Bakery Inc. was created in Pittsburgh, Pennsylvania. The company’s goal was to provide great enriched baked goods to its customers while outsourcing a lot of the work to keep down the overhead cost. At the start of the company they were analyzing their expenses through the use of traditional costing system but through the evaluation of how cost broke down and customers were being charged, found that they needed to make a change. The direction that Super Bakery Inc. felt they should go in was to change their cost system to an activity-based costing system.
Making the change in cost system was a big step in the right direction for the company. They were dividing all costs between customers equally with the traditional system and found that there were other ways to make more profit by distributing the cost. Super Bakery Inc. does not have a large staff base due to the fact they outsource all but the key strategic functions of the business. Traditional cost system has its focus set more on direct labor cost while activity-based system focus on the cost associated with each process along the way to being shipped to the customer.
With the change in how companies conduct business, including Super Bakery Inc., it is clear that making the move to the activity based cost system was the best business move for them. The new system allows the company to look at what resources and the amount of them that are needed to fill each customer’s order and more appropriately breakdown the price for their customers so that they would receive equal profit from each order that they filled. The change will also allow the company to note where they could cut cost and increase their income and remain a competitive factor in the baked good services...