Costing Methods Paper

Topics: Costs, Management, Cost Pages: 2 (580 words) Published: March 22, 2013
CVP and Break-Even Analysis Paper and Presentation
Accounting is an important function for businesses to run successfully. It provides a numbers based understanding to owners and management staff for assistance in areas that could lead to added financial gain. This paper will discuss strategies of the management staff for a company named Super Bakery Inc. and why it was necessary to install an accounting system known as ABC (activity based costing) for its business. This paper will also conclude on whether a job order cost system or process order cost system is needed for the Super Bakery Inc. Company. The strategies that the management team of Super Bakery Inc. used were their success in luring companies together, in-turn organizing the work flow and the process. Their intended goal was to add the most in value to the company while putting less money spent into areas such as staff, fixed assets, and working capital. So far this strategy has been successful for the company and its profits. Super Bakery Inc.’s managers believed that it was necessary to install an ABC (activity based costing) system because they needed a system that was more accurate when assigning costs for orders. The following equation below shows how the total cost of each activity pool is divided by the total number of units of the activity to determine the cost per unit, when using and ABC system (Activity-Based Costing Activities, n.d.). [pic]

Super Bakery Inc. believed that if they had a system in place to complete this process then pricing would improve. I agree with the management’s team reasoning and choosing this system because as they decided to make this change and convert over to this new system they could now identify the appropriate cost associated with a single entry. The new system can recognize cost for each area such as shipping, warehousing, sales, manufacturing, and can also see the costs and profit margins for each sale. Super Bakery Inc. is now...
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