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ACC 561 AUNT CONNIES COOKIE

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ACC 561 AUNT CONNIE’S COOKIES
Aunt Connie’s Cookies
ACC/561
Aunt Connie’s Cookies
How Aunt Connie’s Cookies could use cost accounting systems to
determine their product costs
Aunt Connie's Cookies can use customary cost accounting if they apply
a mix of the labor and material costs, and apply expenses to each
product. It assumes that more cookies baked could cause more
overhead expenses. This is an easy method for Aunt Connie's Cookies,
but it might not give them enough of the right information to really
determine what their product costs are. Aunt Connie's Cookies might
decide to use activity-based costing, which looks at costs according to
the kind of activity rather than the end product. It is different from the
traditional method in that it allows a company to look at their overall
systems in detail, so that they can pinpoint any cost inefficiencies. It will
especially help Aunt Connie's Cookies if they have greater indirect than
direct costs. If Aunt Connie's Cookies used activity-based accounting,
they would have to identify their activities, and then assign each activity
a set cost. When they have done that, they identify how much each
component of each activity costs, and then they take data about each
activity. Eventually they can determine the actual product costs, when
they divide each product into activities at unit-level, the cost-per-batch,
facility-sustaining activities, and product-sustaining activities.
Aunt Connie's cookies might decide to use life-cycle cost analysis or
total cost analysis. This helps the company understand their products.
These are normally a part of activity-based costing, but they can be used
individually as well. Life-cycle cost analysis is typically a part of product
development, as it reveals the total cost of making a product, as in this
situation. Nevertheless, total-cost analysis is likely the most accurate
and useful, since it is a part of making purchasing decisions.

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