Costing Method Paper

Costing Methods Paper

Karla Rendon

University of Phoenix

Accounting

ACCT/561

Jason See

January 08, 2012

Costing Methods Paper

Introduction

Super Bakery Inc. is a virtual corporation that outsources its products such as mineral, vitamin, and protein enriched doughnuts across the country. By doing so, the company has a view of minimizing the cost of operation relative to its income levels along with controlling the flow of the activities that yields its revenue. This explains the realization of its goal in reduction of expenses. Otherwise, it would incur the expenses through the acquisition of goods for the various processes involved. These processes include machinery for production of the different products, maintenance of these machines as well as their replacement whenever needed. Other examples of costs of production include the cost of raw materials and other inputs as well as overhead costs such as the cost of electricity, water, salaries and wages for the greater number of employees who would have to be directly and indirectly involved in the process. Costs of transportation of inputs as well as finished products to the various distribution points is also eliminated, as is the costs of storage of raw materials and finished products before transportation to the target market.

Strategies Used

Super Bakery employed the traditional costing methods that relied on listing of the costs for the various businesses it had sought to perform the various responsibilities on its behalf. This involved the write down of the individual company’s schedule for all firms in a manner that their individual costs and revenues were not independent of Super Bakery’s costs schedule. This meant that the final cost per product was spread out evenly in its units of merchandise. Therefore, was not possible to maximize on the highly profitable units caused to their relatively low costs because the low profit margin units whose production costs were high had a neutralizing...