Super Bakery Cost Methods In today’s economy, organizations continually look to reduce cost of goods, services, and processes. Advancements in technology allow transactions or data to feed to any place, at any time, reducing the need for large traditional corporate structures. Corporations are opting to establish a virtual presence, further reducing cost while increasing flexibility. A virtual company is founded on an idea or principle of intellectual property. In essence, the primary role of the virtual company is to monitor and manage the outsourced activities. Choosing the right cost accounting system is critical to the success of the business. The following paper evaluates the strategy, implementation, and rationale for the selected activity based cost system used by Super Bakery. Super Bakery Strategy Super Bakery, Inc. (Super Bakery) was founded by former Pittsburgh Steelers Franco Harris in 1983 (Darling, 1993, p. 18). The organizational structure is predominantly virtual –Super Bakery’s management team strategy was founded on the premise that it could outsource the majority of its functions without compromising on customer quality or service. The management team believed that instead of creating a multifunctional organization to administer the business, they would outsource selling to a network of independent brokers and contract out manufacturing, warehousing, and shipping (Darling, 1993, p. 18). The structure of the company is a critical part of the strategy. The organization hired four regional sales managers to maintain standardization and consistency between the brokers. It also maintained management of vital finances and accounting by keeping a small team in-house to manage day-to-day activity. Marketing was also an important function that required direct and hands on intervention; therefore, this function remained in-house. To ensure greater integrity and consistency of the products, Harris hired a master baker to develop new products. The organization continued to reinvent itself and increase its market-share by moving into the school system segment of the institutional food market. Super Bakery also avoided local market restrictions on fresh foods by refrigerating products. In addition, the organization developed multiple ways of supporting its customers by working with government agencies to acquire government commodities (flour, butter, fruit) at lower rates (Darling, 1993, p. 20). The most critical part of Super Bakery’s strategy has been its ability to reduce overhead through outsourcing. Although the management team created a viable and reliable structure to support the organization, it was challenged with aspects of managing performance and revenues. The organization needed a system to support multiple layers of manufacturing, shipping, and warehousing. The system needed to be flexible enough to calculate revenue and losses down to the customer level. The leadership team also wanted to monitor customer satisfaction based on performance metrics.
Why an ABC System?
Controlling the cost of outsourced activities proved to be a difficult process for Super Bakery. On a daily basis, the company dealt with multiple external companies that took on the processes of manufacturing, warehousing, shipping, and selling of the produced product. To help combat this issue, the management staff at Super Bakery implemented an Activity Based Cost system (ABC). Management concluded that this method would be more efficient than other more traditional methods, because it places additional emphasis on costs in relation to the various actions associated with production of the individual products. Super…