Comprehensive Product Costing

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Restaurants offer a variety of menu items which have different sizes, ingredients, packaging, and demand. In addition, made-to-order restaurants go one step further and may have different renditions of the same menu items based on how a customer orders them. Take, for example, Chipotle; for the same price, steak tacos could be “crispy” or “soft;” may have white, brown, or no rice; may or may not contain one of three types of salsa; could have cheese or sour cream or neither; and may or may not have lettuce, black or pinto beans, or other vegetables. Combinations for that one menu item are virtually endless! For more details on Chipotle’s cost containment efforts, see the textbook Chapter 7, Section “Management’s Use of Variances-Concepts in Action.”

Profit margins in the restaurant industry are small, and operating costs are high. Good product costing is essential for survival in the business. This project option will allow you to apply your knowledge of product costing to the restaurant industry.

  1. Select a nationally recognized fast casual restaurant chain that offers made-to-order menu items, except a restaurant primarily engaged in making pizza. Some examples would be Chipotle Mexican Grill, Five Guys, Noodles & Co., Panera Bread, and Dunkin Donuts.
    1. For the restaurant chain you have selected, you will need to research and locate company information, menus, and financial information to assist you with the requirements of this project.
    2. Not every chain will have the same financial information available, so it may be necessary to generate your own “fictitious” data in order to complete the required tasks. If you do need to create data, be VERY CLEAR in your computations which data is taken from publically available information (provide the sources) and which data has been generated by you.
  2. Choose three menu items from the menu of the restaurant. Familiarize yourself with the products, including the ingredients, processing method, general selling price in your area, packaging requirements, and accessories (straw, sweetener, fork/knife, condiments, etc.). In Module 3, you will be submitting this information as part of your Portfolio Project milestone.
  3. From the cost information you were able to find or generated on your own, provide responses in Microsoft Excel to the following questions. Reference your calculations to show tracing where numbers come from. (For assistance with Microsoft Excel, please refer to Lynda.com for tutorials.)
    1. Compute the cost of each product under the simple/traditional costing method. For period costs, use direct labor hours.
    2. Compute the net operating profit margin of each product using the simple/traditional costing method.
    3. Compute the total overhead and period cost allocation under activity-based costing (ABC) assumptions for each product.
    4. Compute the per unit ABC cost of each product.
    5. Compute the net profit margin of each product using the ABC costing method.
    6. Compare the net profit margin of the products under the simple/traditional cost assignment and the ABC assignment for each product. Evaluate the difference.
  4. In a Microsoft Word document, write an accompanying memo explaining to the CEO what the costing methods are, the differences between the methods, and which method seems to make sense in this scenario. Also include the pros and cons of the method you are recommending, and why you feel the pros outweigh the cons.

Your paper should meet the following requirements:

  • Minimally seven to ten pages in length (not including the title page and the reference page)
  • Assignment should follow APA guidelines with respect to use of subheadings, 1” margins, and double spacing.
  • References should include your textbook plus two additional credible academic references. All sources used, including your textbook must be referenced; paraphrased and quoted material must have accompanying citations and cited per APA guidelines.
  • Use of CSU Global Library is necessary.

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Explanation & Answer

HI again, please find attached. Don't hesitate to ask for any clarification or edits. Thanks!

Running head: COMPREHENSIVE PRODUCT COSTING

Comprehensive Product Costing
Name
Course Number
State, University
Instructor
Date

COMPREHENSIVE PRODUCT COSTING

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The Panera Bread Company Information
Panera Corporation is one of the restaurants which is recognized nationally as the fast
casual restaurant chain. The restaurant provides made to order menu items .The Panera Bread
Corporation is one of the remarkable corporation that offers fresh baked goods, cafe beverages,
salads, sandwitches, and past dishes in the United States. The corporation also carries its
operations in Canada .The headquarters of the corporation are located at St Lous Missouri .The
Corporation consists of 47,200 employees. The corporation has a strong presence in the US
bakery industry .In a week, the corporation serves approximately 8.3 million customers. The
bakery cafes of the corporation are located in the urban regions, the regional mall locations, the
strip mall and the suburban locations. The menu offered by the corporation is designed in such a
way that it offers a variety of products that are sought by the customers. Regarding the financial
performance of the corporation, it is imperative to denote that the corporation has depicted an
exquisite performance and it seeks to improve and enhance its performance in the future.
According to the prevalent information regarding the finances of the corporation, it is imperative
to depict that in the financial year ending 2013 December the company recorded the revenues
that amounted to $2,385 million. The aforementioned figure was increase of 12 percent from the
previous year. The net profit of the corporation in the year 2013 amounted to $196.2 million. The
aforementioned figure was an increase of 13.1 $ from the previous year. The corporation carries
its franchising business and retail bakery café business under its trade names which include; the
paradise bakery and café, Saint Louis Bread Co and Panera bread. The presence of the
corporation in the United States has provided an opportunity for the organization to address the
needs and demands of the organization.

COMPREHENSIVE PRODUCT COSTING

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One of the strength underlying the corporation is that it innovates the menu offerings a
fact that provides competitive advantages to the customers (Panera Bread Company SWOT
Analysis, 2018). Another advantage underlying the Panera Bread restaurant company or
corporation is that the organization provides or is equipped with a unique supply chain.
Regarding the supply chain of the Panera Bread Corporation, it is imperative to depict that the
dough for fresh bread is supplied on a daily basis. The dough for fresh bread is supplied along
with the cream cheese and tuna. In the year 2013, the total amount of the dough facilities
amounted to 24 (Panera Bread Company SWOT Analysis, 2018). .Fresh dough is the one which
is behind the high quality artisan bread which is manufactured or incepted by the Panera Bread
Corporation. The quality sandwithches and salad of the Panera Bread Corporation is due to the
fresh produce. The supply chain functioning and the flesh dough system provides the corporation
with maximum competitive advantages. The fact that the corporation updates its menu offerings
in order to meet the preferences of the customers provides the corporation with maximum
competitive advantages (Panera Bread Company SWOT Analysis, 2018)..Following the stiff and
intense competition in the restaurant industry, the corporation will be triggered to decline its
prices a fact that will impact on the profit margin of the corporation.
Available Financial Information of the Company (Panera Bread Corporation)
The Consolidated Financial Statements of the Panera Bread Corporation (
http://www.annualreports.com/HostedData/AnnualReportArchive/p/NASDAQ_PNRA_201
4.pdf

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COMPREHENSIVE PRODUCT COSTING
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