Instructor – Donald Frey
February 15, 2015
Week 6 – Project
Successfully running a business is filled with constant need for making quick and accurate decisions that will benefit the company as a whole. Using a mix of different accounting approaches will be best when it comes to making financial decisions about my company of choice for this particular project.
“Management accounting is used to measures and analyzes both financial and nonfinancial information to help managers make decisions to work towards fulfilling the goals the company” (Horngren, Datar, Rajan, 2012). I will use management accounting information to help with basically all the decisions that will need to be made regarding the company. Within this accounting system, I will also implement cost accounting. “Management accounting information helps managers formulate strategy by answering questions” (Horngren, Datar, Rajan, 2012).
Customers demand much more than just a fair price; they expect a quality product that is going to be delivered in a timely way as well. There are many factors that are involved when a customer decides whether or not a product is worth what they are required to pay for it. Customers want companies to use the value chain and supply chain to deliver ever improving product and service to them. One way to help track and maintain the best value product for the customer is to use the value chain. The value chain is the main business functions that add value to a company’s products and services. These functions comprise of research and development, product design, manufacturing, marketing, distribution, and customer service. “Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations” (Horngren, Datar, Rajan, 2012).
There are many different costs associated with running a business. Some cost objects that would be used in my business (a bakery) include the following:
Cost of creating batched baked goods such as cookies, cupcakes, donuts, general cakes, etc. to sell to the general public out of the bakeries shop.
Cost of Delivering an order such as a custom wedding or birthday order.
Cost of creating custom baked goods such as wedding cakes, specialty cookies, cupcakes, etc. The custom orders may have certain dietary needs to be met that can increase the production cost, and/or specific decorating needs to be met as well.
There are many different costs involved with producing a product for a customer, which include, but are not limited to, the employee wages, overhead costs, ingredients needed to produce the product, running the ovens and mixers, advertising, rent, and much more. There will be different cost management approaches needed to be used to determine costs for different projects taken on by the company. Some of the cost management methods that will be used include batch costing, job costing, or even a mix of different costing approaches.
Another company cost to consider when running a business is the capacity level. The capacity level chosen will affect the budgeted fixed overhead cost rate. As a lower capacity level is chosen, the fixed cost per unit increases. Determining the appropriate level of capacity takes a lot of planning, thought, and evaluating. Too much capacity means incurring costs of unused capacity, while too little capacity means that demand may go unfilled. It is important that manufacturers plan and control their theoretical, practical, normal and next year's budgeted capacity levels. A company needs to be able to properly budget for the future. Knowing how to use these constraints helps to establish a company’s COGS when creating the financial statements.
The costs associated with running a bakery are pretty obvious and are all in general related to producing the baked