Aunt Connie's Cookie Simulation

Aunt Connie's Cookie Simulation

Daniel Martin

University of Phoenix

Accounting

ACCT/561

Seth Jardine

November 15, 2010

Aunt Connie's Cookie Simulation

The Aunt Connie’s brand of cookies has grown successful over the years with the distribution of Lemon Crème’ and Real Mint cookies. Recent price increases have caused the volume of sales at Aunt Connie’s Cookies to slow. The owner of the company and her CFO must make important operational decisions to increase sales volume. The business decisions facing Aunt Connie’s Cookies include whether to invest capital in the form of a new cookie machine to increase baking capacity and meet customer demand, to lower prices to increase demand without experiencing operating losses, and whether to increase advertising dollars to generate a higher level of revenues.

Business owners and managers must be able to analyze cost information to make decisions regarding a company’s operations. Cost accounting is a significant part of an organization’s management system that “measures the cost for the purpose of managerial decision-making and financial reporting” (Hornberg, Sundem, Stratton, Burgstahler, & Schatzberg, 2008, p. 137). The cost data that organization owners and managers use to make important business decisions come from accounting systems –“the techniques used to measure the cost of a product, service, customer, or othe cost system object” (Hornberg, Sundem, Stratton, Burgstahler, & Schatzberg, 2008, p. 137)

Hornberg et al (2008) notes that, the cost accounting system typically includes two processes:

1. Cost accumulation: Collecting costs by some “natural” classification, such as materials or labor, or by activities performed such as order processing or machine processing.

2. Cost assignment: Attaching costs to one or more cost objects, such as activities, processes, departments, customers, or products.

The proper allocation and classification of costs will allow management at...