Aunt Cookies

Aunt Connie’s cookies was founded in 1986 after a friend of Maria Villanueva was so impressed with the taste and quality of her aunt’s acumen and pastry-making skills that she urged Maria to consider making her aunts creation of cookies into a business proposition. Maria Villanueva is now the CEO of Aunt Connie’s cookie company. Aunt Connie’s brand has grown into a successful company making real mint and lemon crème cookies. To continue to grow and maintain profitability, Maria has appointed a chief operating officer to make cost accounting decisions in order to maximize the company’s operating profit and contribution margin.

Based on the simulation, Maria Villanueva has to make important business decisions on changing the volume, cost, and price of producing the lemon crème and real mint cookies and conclude how the decision will affect the bottom line profit and the contribution margins. To consider the best possible outcomes for the company, the chief operating officer has incorporated a cost accounting system to determine the company’s product cost. “The cost data that managers use for decision making come from the cost accounting system, the techniques used to determine the cost of a product, service, customer, or other cost object. The cost accounting system is the most fundamental component of a cost management system. It supports all other cost management system tools and techniques” (Horngren, 2008).

For Maria to evaluate her options, she must first understand how each cost behaves in relation to the changes in volume. A cost management system will help Maria determine the different types of variable and fixed cost that must be taken into account when measuring the cost of each product produced. In the simulation example, one of the costs to consider is the advertising expense, since the advertising expense is a fixed cost, the cost will not change when the volume decreases or increases. Company’s who have a hard time allocating fixed cost to the every...