Acc 561 Cost Methoding

Costing Methods

Reginald D. Marable, Sr.

University of Phoenix

ACC 561

Eugenia Thompson

August 2, 2012

Costing Methods

Week four’s individual assignment consists of writing a costing methods paper pertaining to Super Bakery, Inc. In this paper I will discuss the strategies management of Super Bakery, Inc., used. It will also cover why the management of Super Bakery, Inc., thought it was necessary to install an activity-based costing system into their operation. A comparison of a job order cost system and a process order system will be discussed to decide if the strategies of either system would work for Super Bakery, Inc.

Super Bakery, Inc., is a company founded by ex-National Football League (NFL) Pittsburgh Steelers player Franco Harris. His idea for the bakery was to provide vitamin, mineral, and protein enriched doughnuts and other baked items primarily to schools and other institutions (Kimmel, Weygandt, & Kieso, 2009). Franco Harris’ idea for Super Bakery, Inc., was to have a core business that outsourced activities as selling, manufacturing, warehousing, and shipping (Kimmel, Weygandt, & Kieso, 2009). The main idea for operating this way allowed Super Bakery to pull other organizations with expertise in these areas to help by reducing the amount of liabilities for facilities, labor, and working capital. Structured with an outsourced network of supporting companies Super Bakery sales grew at an average annual rate of 20%.

The growth of Super Bakery proved to be a success story but one challenge the organization faced related to controlling costs. Initially the organization ran a more traditional costing method that simply spread the costs of the operation to every customer. This caused every customer associated with the organization to pay the same amount for product no matter the expense related to that customer. Some customers probably paid prices for shipping that would otherwise be less expensive because of the distance...