March 12, 2012
Super Bakery is a virtual company that handles only core functions of the business while all other aspects are outsourced. Even though the bakery became a leader in the institutional baked goods market the company had reoccurring issues containing costs and ensuring the quality of their products. The management team at Super Bakery decided to implement and activity based costing plan to help maximize profits and ensure quality products to customers. However, Super Bakery had an additional challenge when implementing a cost system. Because the majority of functions are outsourced, the costing plan ...view middle of the document...
As well as supplying complete prepackaged meals to schools and having expedient delivery to avoid inventory and stock out costs.
Last, Super Bakery reduced their overhead and capital investment by outsourcing the major functions of the business. They do not sell or distribute their own products, outside contracted vendors handle these duties.
The Reasoning behind ABC
An activity based cost system was put into place by Super Bakery so that profitability could be easily tracked and allow management to monitor and track the service and performance of their outside contractors more closely.
The activity based cost system was the right choice for Super Bakery. Since Super Bakery is a virtual corporation the emphasis needs to be more on the number of orders that are processed instead of monetary value of each order. The reason is that the number of orders dictates the costs that are charged to Super Bakery but their outside contractors.
The system that the bakery uses allows historical capture of cost drivers. This allows management to accurately calculate the real costs of processing each order and servicing each distinct customer. Super Bakery is much more accurate in its pricing of orders, recovering the costs...