Professional Documents
Culture Documents
Management accounting
Burger King Holdings Inc.
An article in the August 22, 2008 Wall Street Journal,
‘‘Burger King Battles Costs with Small Whopper Jr.,’’ describes
Burger King’s attempt to
‘‘overcome high ingredient costs that are eating into its profit.’’
Chief Executive John Chidsey said,
‘‘To combat costs, Burger King is testing its $1 Whopper Jr. with
smaller hamburger pattie—down to two ounces apiece from 2.2
ounces—in some markets and experimenting with different
beverage sizes.’’
The article went on to explain that ‘‘McDonald’s is testing
modifications to its $1 double cheeseburger, including
selling a different version and raising the price of the
traditional double cheeseburger.’’
Managerial Issues?
What is the TOTAL COST to make and sell each
Whopper Jr. or McDonald’s double cheeseburger?
How many burgers must be sold (VOLUME) and at what
prices (PRICE) to cover costs and to provide
shareholders with an acceptable return on their
investment?
Given that fast-food prices are constrained by competitors’
prices, what other cost-cutting (Cost Reduction)
measures might Burger King employ to return operations
to normal profit margins?
Production Process for Goods and
Services
and other external users of The amount at which cost of goods sold should
be reported on the income statement; and
financial information. The valuation of inventories on the balance
sheet.
Users and Uses of Cost Accounting
Information