Custom Costing Method essay paper sample
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The management of Super Bakery, Inc. used several strategies to boost the company’s performance to a higher level of averagely 20% of its annual sales level. These strategies range from service and product differentiation, besides building the company’s capabilities that eventually resulted to its advancement in the institutional food market. The management used product differentiation by creating a diverse range of products ranging from mineral, vitamin and protein enriched doughnuts (Weygandt, Kimmel & Kieso, 2009). The management has also built the company’s capabilities through ensuring that the business attains a maximum value by undertaking minimum investment in fixed assets, permanent staff, and working capital.
In the past, the management of Super Bakery, Inc. has faced challenges while using the traditional costing method in the control of the outsourced activities cost (Weygandt, Kimmel & Kieso, 2009). Nonetheless, there is a need to establish an accurate tracking system that results in the implementation of the activity based costing system. It is rational to change from traditional costing method to activity based costing as it ensures that the overhead costs are accurately accounted for as the company shifts into a highly global competitive market with drastic technological changes in the manufacturing process (Drury, 2007).
Since Super Bakery, Inc. offers a variety of baked products to their customers, a process order cost system would be suitable for the company. Super Bakery Inc., delivers mineral, vitamin, and protein-enriched doughnuts besides other pastries to chain supermarkets and primarily school systems (Weygandt, Kimmel & Kieso, 2009). Process order costing system is also necessary as Super Bakery, Inc., deals with a single identical product produced through a continuous basis and thereafter distributes the products to its diverse markets through its outsourced suppliers. On the other hand, process order costing system ensures accounting based on departments as compared to job order cost system (Vanderbeck, 2009).