Super Bakery Costing

Activity Based Costing in Super Bakery

Michael Magons

Accounting ACC/561

March 18, 2012
Alanna Jones

Activity Based Costing in Super Bakery

      Super Bakery was founded by Franco Harris in 1983. This bakery is not typical of other bakeries, it may manufacture its own dough, but all delivery, cooking, and packaging is outsourced (Davis & Darling, 1996). Super Bakery uses an activity based costing system, and described here is why that costing method was chosen for Super Bakery by its managers. Job costing and process costing were other alternatives Super Bakery could have used and pros and cons for these systems are also included here.
Activity Based Costing
      A firm that meets certain criteria may find activity based costing more efficient and convenient than either job or process costing. Super Bakery changed the manufacturing process by creating and distributing their product in a new vacuum sealed packaging (Davis & Darling, 1996). A new manufacturing process that significantly changes traditional costing is a sign that activity based costing should be used (Kimmel, Kieso & Weygandt, 2009). Diverse product lines that require many steps also indicate that activity based costing should be used. Super Bakery purchases ingredients, has them shipped and stored, manufactured into dough at its own plant, shipped from there to bakeries participating in Super Bakery business, marketing, product design, packaging of meals and bulk items, and shipping from a bakery to a purchaser. In 1996 Super Bakery handled all these steps with nine employees. Its virtual company design required it to organize all production and delivery without performing it itself, and activity based costing is a recommended method for a diverse company like this.
Is Activity Based Costing Better
      Job and process costing work well when accounting for a single job or manufacture of a single product (Kimmel, Kieso & Weygandt, 2009). Super Bakery is not a simple job or...