Activity Based Costing- Super Bakery Inc.

Activity Based Costing- Super Bakery Inc.

What strategies did the management of Super Bakery Inc. use?

The Super Bakery Inc. has adopted three strategies in order to improve the position of the company in the market. The three strategies followed by the organization are: supply chain management strategy, cost advantage and adopt strategies that could improve the profitability of the organization. Super Bakery Inc. adopted the supply chain management system under which they conducted its operational activities inside the organization whereas the other activities were outbound. The company outsourced the functions like warehousing, manufacturing and shipping. This enables the management to perform its strategic functions properly. The management of the organization also developed the strategy to add maximum value to the organization by reducing the amount invested in permanent employees, fixed assets and working capital. This will enable the firm in increasing the sales and achieve the targeted growth rate of the organization. The company also used the strategy of developing cost advantage that will enable the firm in gaining cost advantage. The company is currently using its traditional costing methods that are unable to generate huge profits for the firm. The management of the company has decided to change its costing method to job order costing that could define the cost associated with each order placed by the customers. The company has developed strategy to gain competitive advantage by decreasing the cost and provide products at affordable prices. Therefore these strategies will enable the firm to attract more customers, retain the existing customers and create value of the firm.

Why did Super Bakery's management think it was necessary to install an ABC system? Do you agree with their reasoning? If you disagree, identify your recommended costing system, including your rationale, to management.

The Super Bakery Inc. was aware ...