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ACC 561 Accounting Systems to Determine Product Costs

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ACC 561 Accounting Systems to Determine Product Costs
ACC 561
Cookies: Accounting Systems to Determine Product Costs
Every company in the world is either selling something for a profit or on
its way to going out of business. Successful businesses will “cost” their
products or services to determine the best business mix while
continuously striving for sustained optimization or improvement. This
includes but is not limited to production methods, labor, quantity
determinations, and selling prices. Aunt Connie’s Cookies carved its
niche in the dessert market with delicious lemon crème and real mint
cookies. While moving forward in determining product costs and optimal
business plans for her cookies, accounting systems could provide a
substantial edge.
Advertising and price reduction are two complimentary techniques to
increase volume of sales. While they both reduce the contribution margin
for the product in question, the overall sales quantity increase could
supersede the reduction of contribution margin per unit. This of course,
is the desired effect: to achieve maximum profitability at an acceptable
level of quality. More pertinently, this is a critical insertion point for
accurate cost accounting systems and sales predictions. While an
overall picture of fixed and variable costs for a company is helpful, those
same costs traced and allocated to specific products is more strategic. A
modular or product-based look at contribution margins could aid Connie
in implementing the right marketing strategy for the right products. This
in itself requires expenditure, of noteworthy mention is a need for a
detailed database to match “costs with revenues” for each cookie type
(Dunne & Wolk, 1977). The payoff should exceed the investment.
Accounting systems could also help visualize capacity utilization.
Regarding Aunt Connie’s Cookie scenario, Maria is anxious to fulfill a
bulk order at a reduced contribution margin. A quick look at the
company’s cost-volume-profit graphs with volume as the cost driver
reveals that accepting the bulk order would prove most profitable.
Automated accounting systems like those employed by the cookie

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