PepsiCo

Abstract

The research discusses the different aspects of cost accounting of PepsiCo and their impact on the company's decisions and financial reporting. The study also discusses the ability of the company to gain competitive advantage by using methods such as activity based accounting, and statement of accurate results in the financial reporting using inventory cost methods.

Table of Contents

Abstractii

Introduction1

Thesis Statement1

Aim and Objective1

Discussion2

Allocation of Cost2

Activity-Based Accounting and Management3

Standardized Costing and Inventory Costing Methods4

Product Costing Variances5

Conclusion6

References7

PepsiCo

Introduction

PepsiCo is a US based company formed in 1898, which sells a number of products in the category of FMCG. One of the most popular and marketed product of PepsiCo is the non-alcoholic beverage PepsiCo. The research will seek to analyze PepsiCo's cost accounting methods and how it affects the business in terms of financial reporting, allocation of cost, and business decisions. Cost accounting is a discipline of accounting, which is used by the management accounting to determine, among others, the contribution margin, the breakeven cost of the product and the possible decisions. The data that throws the current cost accounting, usually used as a basis for making financial projections, and also serve as support for the calculation of standard cost variances aimed at measuring the performance of some departments of a company.

Thesis Statement

There is a significant relationship between cost accounting methods and operational activities of PepsiCo.

Aim and Objective

The aim and objective of this study is to research on the cost allocation methods, activity based accounting and management, inventory costing method and product cost variance analysis of PepsiCo.

Discussion

Allocation of Cost

There is no real cost for a product or service unless company only manufactures a product or provides a service only. In this case, that product or service receives all costs. The methods to allocate costs from departments and production activities until the products are known as methods of cost allocation or cost distributions. Due to the impact of volume changes on fixed and variable costs, the capacity level chosen by PepsiCo affect factory overhead costs, distinguishing between excess capacity and overcapacity. Excess capacity is a temporary lack of use of facilities resulting from a decline in demand for the beverages produced by PepsiCo. Excess capacity refers to facilities that are simply not necessary for the company. It is essential for PepsiCo to determine or forecast demand in the short-term and long-term, so that it can identify capacity requirements. As a result, the company can avoid any interruptions in the production of volume of beverages (Vanderbeck, 2009).

After deciding if the management of PepsiCo wants to use theoretical, practice, normal or expected capacity, the company can accumulate the costs of production departments. The production departments or operational areas such as manufacturing, assembly and finishing are responsible for converting materials directly into finished products. Departments provide support services to other departments of production. PepsiCo allocates costs of production to each area of operation in order that the goods produced reflect the full cost of production. Moreover, the allocation of costs of production allows departmental managers to forecast and plan for future cost ...