Activity Based Costing 13
Running head: ACTIVITY BASED COSTING CASE
Activity Based Costing Case
David Welch
University of Phoenix
Accounting Capstone
ACC/594
Tom Myers
February 1, 2010
The selection of the right cost calculation method is of critical importance when it comes to determining the real product profitability. Activity Based Costing is one approach that can be used. Activity based costing is a managerial accounting system that determines the cost of activities without distortion and provides management with relevant and timely information (Dunn, 2009). This paper will briefly summarize Colombo’s competitive environment and General Mills strategy in response to that environment, using the ABC analysis, Team A will determine new segment profitability statement, and based upon the analysis, suggest changes for General Mills.
Colombo’s Competitive Environment and General Mills Response Strategy A competitive environment includes anything that affects the way a company competes with other competitors offering similar products. Examples of factors that influence the competitive environment of companies are product pricing, sales locations, marketing targets, and product enhancements or changes. For instance, a large part of Colombo’s competitive environment was marketing targets and locations. The market for frozen yogurt has changed continuously over the years. The change thus far has streamed from independent shop owners to franchises and then to food service operators, or impulse locations, and Colombo failed to monitor and adjust to the changes. Colombo continued to put their main focus on independent shop owners, and this decision hurt them when franchises started to take controller of the market. Many of their customers opted to go the franchise route and fill their purchasing needs through the franchiser. Another challenge for Colombo Frozen Yogurt was the small family-owned type of shops. These particular sales locations focused on their sales environment and
Activity Based Costing Case
David Welch
University of Phoenix
Accounting Capstone
ACC/594
Tom Myers
February 1, 2010
The selection of the right cost calculation method is of critical importance when it comes to determining the real product profitability. Activity Based Costing is one approach that can be used. Activity based costing is a managerial accounting system that determines the cost of activities without distortion and provides management with relevant and timely information (Dunn, 2009). This paper will briefly summarize Colombo’s competitive environment and General Mills strategy in response to that environment, using the ABC analysis, Team A will determine new segment profitability statement, and based upon the analysis, suggest changes for General Mills.
Colombo’s Competitive Environment and General Mills Response Strategy A competitive environment includes anything that affects the way a company competes with other competitors offering similar products. Examples of factors that influence the competitive environment of companies are product pricing, sales locations, marketing targets, and product enhancements or changes. For instance, a large part of Colombo’s competitive environment was marketing targets and locations. The market for frozen yogurt has changed continuously over the years. The change thus far has streamed from independent shop owners to franchises and then to food service operators, or impulse locations, and Colombo failed to monitor and adjust to the changes. Colombo continued to put their main focus on independent shop owners, and this decision hurt them when franchises started to take controller of the market. Many of their customers opted to go the franchise route and fill their purchasing needs through the franchiser. Another challenge for Colombo Frozen Yogurt was the small family-owned type of shops. These particular sales locations focused on their sales environment and