Toni had worked as an apprentice baker in a large bakery

Assignment Help Managerial Accounting

Reference no: EM13376328

Toni had worked as an apprentice baker in a large bakery that supplied different types of bread - from the standard white loaf to the speciality bread such as rye, gluten-free and organic. At the end of her training, she decided to start a small business specialising in producing cakes - in particular, cakes with ornate decorations made from icing sugar - and Danish pastries because she did not want to compete with the large bakeries for the "bread market". As she was close to office buildings, she decided to try and increase her daily cash-flow by selling "fresh-cut" sandwiches.

Having spent most of her savings on purchasing equipment and supplies, renovating shop premises, and employing two shop assistants, she did not want to spend money for an accountant to set up an accounting system. She wondered whether she should base her cost-management system on the system adopted in the large bakery.

As an apprentice, she had not been involved in the management aspects of operating a bakery, and she did not know what sort of information she would need to ensure that she did not lose her investment in her business. She was certain that there was a ready and reasonably large market for her bakery products. She felt that all she needed was a cash-statement each week to show her what her receipts and payments were, and an annual set of accounts to make sure that she was operating at a profit. To ensure that she recovered her costs, she intended to follow the product costing strategy used by the large bakery that she was an apprentice in.

The large bakery produced a variety of bread using highly automated processes. In ascertaining the cost of its different types of bread, the large bakery treated flour as a direct cost. All other costs were treated as indirect costs, and were allocated. It was a simple system that Toni thought she could emulate. However, the large bakery did not produce cakes and pastries. Cakes and pastries require highly specialised
labour skills because the processes may not be easily standardised and automated.

Required:

Toni is relying on weekly cash flow and annual financial accounts to ensure that she remains in business in the long-term. She is also attempting to ensure that her pricing and cost-management strategies are appropriate by adopting the cost management system used in the large bakery. Do you agree with Toni's approach?

Support your opinion by addressing the following issues:

a) How does one ensure that a cost-management system provides relevant and useful information?

b) Toni is relying on financial feedback, and the product costing method adopted by the large bakery. What are the strengths and weaknesses of these approaches?

c) Outline any changes you would recommend that would help Toni to manage her business. Explain how your changes would address the weaknesses that you have identified in Toni's proposed system.

Reference no: EM13376328

Questions Cloud

1 which of the following would typically be part of the : 1. which of the following would typically be part of the agenda for an opening meeting?i. discussion of business

1 the status of the internal audit function should be free : 1. the status of the internal audit function should be free from the impact of irresponsible policy changes by

Questionusing the information below and on the next two : questionusing the information below and on the next two pages prepare the following as at 30th june 2014part a

Zubick corporation produces and supplies 2 types of : zubick corporation produces and supplies 2 types of component parts to industrial equipment manufacturers. these parts

Toni had worked as an apprentice baker in a large bakery : toni had worked as an apprentice baker in a large bakery that supplied different types of bread - from the standard

Prepare the 2013 form 1040 and all other required federal : prepare the 2013 form 1040 and all other required federal forms and schedules for brett simons. the returns should be

Client profilejossiah and jemima benson have recently : client profilejossiah and jemima benson have recently married and in planning their future have decided to solicit the

Standard fraud risk assessment questionif someone did want : standard fraud risk assessment questionif someone did want to commit fraud and not be caught how would they do it?one

Part-1farmers friend ff started as a mail-order company : part-1farmers friend ff started as a mail-order company providing a clothing and personal items supply service to

User Account

All Pages