Explain how activity based costing could overcome

Assignment Help Managerial Accounting
Reference no: EM13163400

The French pastry company makes a range of delicious cakes and pastries. Their website shows the following information about the company's history:

The business began in 1990, with three product lines - croissants, fruit tarts and eclairs. The products were very successful and we sold everything we could produce, using hard work and simple machinery.

Today, we still make and sell a lot of croissants and eclairs, but we also produce a wide range of low volume lines such as fruit danishes, snails, and friands. These products are more complicated to produce and have shorter production runs, so that there is more set-up time for the machinery and more material handling. We have introduced computerised mixing machines and ovens which have replaced a lot of direct labour in our factory, and we are focussing more on delivery and quality to meet our customers' requirements.

You have recently been hired as the management accountant for the business due to the retirement of the previous management accountant, who had been with the business since it began operations. When you look at the results, the company's profits have been declining over recent years. However, the product profitability analysis for the specialty lines on fruit danished, snails and friands shows that they are profitable. You wonder if there is a problem with the product costing system which the French pastry company is using. When you talk to the manufacturing supervisors and managers, they also believe that the product costing system is distorting the costs.

Required:

1) Using the information given above, describe the changes in cost structure which would have occurred at the company over the last 20 years, and explain their causes

2) Do you think the existing costing systems overstate or understate the cost of producing

a. Croissants

b. Snails

3) Explain how activity based costing could overcome the deficiencies in the existing costing system

4) After many meetings with manufacturing staff, you have identified the activity centres in the business, and collected information about some activity drivers. Identify the best activity (cost) driver for each activity centre, and prepare notes on why you have selected each driver to explain your choices to managers in your next meeting.

5) Use activity based costing to develop the cost for each activity centre.

Reference no: EM13163400

Why cost minimisation and profit maximisation

Discuss the advantages and disadvantages of organisational decentralisation - Critically discuss the practice of outsourcing and the problems you consider may be associated w

Compute the budgeted fixed cost per labor

Compute the budgeted fixed cost per labor hour for the fixed overhead separately for each plant and compute the variable overhead spending variance and the variable overhead e

Determine breakeven total volume of sales

Determine breakeven total volume of sales and sales volume for each product - Determine sales volume and sales revenue for the company to earn Br500,000 profit after 30% profi

Stages of capital decision making process

Compare and contrast the kinds of decisions that are made in the Cancer Center capital investment decision analysis for the for-profit and non-profit healthcare facilities u

What is previews profit margin on computer monitors

What is Preview's profit margin on computer monitors? Why is the profit margin to thin on computer Tonitors - what are sortie of the steps that Proview International has taken

Calculate the budgeted total unit cost

Ash Creek Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows. Calculate the budg

Discuss the value of classifying costs by activity category

Discuss the value of classifying and reporting costs by activity category. Calculate the total manufacturing cost to produce 20,000 units of the deluxe model. Present the tot

Determine the total cost to redecorate the mayor offices

Overhead is applied to contracts by using a predetermined overhead rate that is based on direct professional labor cost.  Actual professional labor during the year was $655,

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd