Running Head: Costing Methods Paper
Costing Methods Paper
February 14, 2011
Professor Micheal Gaspar
Super Bakery is a distinguished company created in 1990. The company has is a supplier of mineral, vitamin, and protein enriched doughnuts. The strategy applied by the company is job order cost method. Job costing is a product costing system when costs are accumulated by specific job orders and assigned to batches of products. In other words, manufacturing costs are assigned to specific job, specific customers, specific orders, specific projects, and specific contracts. Job costing is preferable to small and medium-sized companies, such as professional services (e.g. medical, legal), advertising agencies, construction, shipbuilding, custom equipment/furniture manufacturing. Http://simplestudies.com/activity-based-costing_(abc).html The management of Super Bakery thought it was necessary to implement the activities of the ABC cost method. The concept of the method is to produce a costing system that a company allocates factory overhead costs to activity center (e.g. bakery machine set ups, operating machines) and then uses activity cost drivers to allocate factory overhead costs to individual products or services. Http://simplestudies.com/activity-based-costing_(abc).html The previous strategy of the company did not produce positive gains or locate profit margins spread across activities of the company. The company was found twenty years ago and has only a 20% increase of production. The percentage requires an immediate reaction of change. Super Bakery acts as a virtual company in which main functions are performed inside of the company. The company implemented cost activities such as manufacturing, warehousing, and shipping toward outside entities. The external production consists of a network of outside companies. Super Bakery reached the obstacle of controlling the cost of outsourced activities within the...
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