You are on page 1of 4

Running head: COSTING METHODS

1

Costing Methods Sally Petersen ACC 561 July 30, 2012 Jason See

Finally. Adopting the ABC System Management transferred to the ABC system so that they could have a more control over the tracking of costs over each individual order. and protein enriched doughnuts and other baked goods to the institutional food market. Super Bakery. packaging and distribution. It is unique in that. “is a nationwide supplier of mineral. strategic functions of the business are performed inside the company. by contracting out major functions of the business” (Davis and Darling. I think that switching to the ABC system was the right decision for management to make. 1996. deals with companies across multiple regions and so the orders involve different base costs. “Super Bakery reduced capital investment and overhead expense. The ABC system will also allow Super Bakery. Inc. Inc. p. vitamin. specific customer targeting. From there. These include the departments of selling. Super Bakery’s Strategies. 1996).” Super Bakery has used four main strategies to grow the business 20% to 30% consistently over the past eight years. 1996). 20). Inc. manufacturing. Super Bakery. and primarily school system” (Davis and Darling. They are conservative staffing. and using governmentsupported supplies. future decisions about which products to continue with will be . warehousing and shipping.COSTING METHODS 2 Costing Methods Created in 1990 by Franco Harris. to “track profitability of each customer’s account” (Davis and Darling. according to Davis and Darling (1996) it is “a virtual corporation in which only the core. Implementing it allows the true costs of each sale to come through and the real profit margins will begin to show. Switching to an ABC system allows the company to see the individual costs of products for each supplier and distributor by showing the unit cost instead of just the total cost of the product.

2009. this system does not work well with Super Bakery. setup. The second is process order costing. Inc. Customer profitability will also be able to be tracked easier. 2009). Cost Systems There are two other order cost systems that management looked at.COSTING METHODS 3 much easier to make. 773). 772). instead of assigning costs to specific products or job orders” (Kimmel. enhanced control over overhead costs. This system deals with machine work hours to calculate the costs and the overhead values. The ABC system “includes increased number of cost pools used to assign overhead. p. “Under a job order cost system. p. . Weygandt. Management will use it to identify costs that are out of range and need analyzed as well as making sure that prices are set to current and accurate costing of all activities that go into the making of their product. They of course could be used but would not give accurate data to work with for pricing and customer analysis. is almost virtual due to all of the outsourcing that it practices. This system would not be suitable for Super Bakery. The first was the job order cost system. Inc. as it is set up to work with direct labor costs. the company assigns costs to each job or to each batch of goods” (Kimmel. “Process costing accumulates product-related costs for a period of time (such as a week or a month). & Kieso. and therefore management can make better decisions” (Kimmel. Weygandt. 2009. Inc. & Kieso. & Kieso. Super Bakery. Again. Conclusion Super Bakery will use ABC costing to continue to grow and prosper in the upcoming years. Weygandt.

COSTING METHODS 4 References Davis.T. pp. Kimmel. Management Accounting.. Accounting: Tools for business decision making (3rd ed. D. (2009).). J. & Kieso. 18-26. B. D. NJ: John Wiley & Sons . Weygandt. (1996.. Hoboken. E. October). ABC in a Virtual Corporation. P.. & Darling. J.