Running head: Costing Methods

Costing Methods Paper

The Super Bakery Inc. is a cybernetic company which outsourced their principal business products. Outsourcing allowed Super Bakery to focus on their core competencies and regulate the surge of activities responsible for their revenue without attaining the immeasurable accountability of accepting the risks associated with the various stages of transaction and production. This concept justifies the realization of the organizations objective to reduce their expenses, otherwise expenses would be incurred with the acquisition of applicable resources related to the several processes involved in the day to day operations of the business, which include production equipment utilized in the production of various products, preservation of the production equipment in addition to repairs as well as replacement as needed and production costs. Overhead expenses such as water, electricity, wages and salaries for those employees closely related to the process as well as raw materials are all examples of production costs. Super Bakery utilized customary costing methods, which depended on itemizing the costs for the various conglomerates utilized to achieve the numerous tasks at their request, which consisted of them listing each organizations schedule that indicates their revenues along with their individual costs are not unrelated to their costs schedule. This method allowed the definitive cost per product to be evenly distributed in their merchandise per unit. As a result, the difference in the cost per unit configuration is concealed by their integration.

Activity Based Costing, ABC The activity Based Costing method is highly more effective than the other conventional methods as it emphasizes the costs relative to the actions which coincide with the actual production of each specific product. Indirect costs for a specific product are replicated in its direct cost therefore providing Super Bakery with a precise depiction of the cost-effectiveness of their numerous products. In addition, Super Bakery can follow the movement of costs more competently and most efficiently in addition to the preparation of incisive profit-related forecasts for their various products giving them ultimate control of costs of the sectors involved. Unfortunately, the ABC method is not the most appropriate method for Super Bakery Inc. since they are persuaded toward costs reduction as its ultimate source in their quest for increased profits as by definition accepts all costs which are sustained within the unit production and are precisely accredited to that specific product. Unfortunately, the ABC method is not the most appropriate method for Super Bakery Inc. since they are persuaded toward costs reduction as its ultimate source in their quest for increased profits as by definition accepts all costs which are sustained within the unit production and are precisely accredited to that specific product. Additionally, false reflection is an aspect related to costs to the company, which is extremely misused by the various firms Super Bakery contracted therefore intensifying the organizations obligation in relation to the costs. Falsification is experienced by most organizations. Finally the ABC method is comparatively costly due to its complicated environment as it relates to the organizations involvement in detailing the cost per activity for several sub-contractors.

Utilization of this method will result in Super Bakery incurring more costs rather than minimizing their costs, which is their goal.

Job Order and Process Costing System The job order system is the ultimate method for Super Bakery since they are involved with various products. This cost method system will allow the organization to track the cost of production per unit without the involvement of unrelated expenses. Process costing is an important part of warehousing and shipping as well as production within companies that Super Bakery has sub contracted to handle the production of similar Super Bakery products. As a result, process costing for distinctive companies functions as instrument of ratification for Super Bakery Inc., enabling them to achieve their objective to control costs.

References
Types of Accounting Costing Systems