Create A 9-Slide Presentation Analyzing Cost Account

Create A 9 Slide Presentation In Which You Analyze Cost Accounting Pra

Create a 9-slide presentation in which you analyze cost accounting practices to make a recommendation about whether or not to accept a purchase offer at a lower price than normal. You may either record the presentation or write a 2-3 page supporting report. Scenario The Acme Pickle Company has distributed pickles under the "Florida's Best" brand for eight years from its production facility in Jacksonville, Florida. It sells the pickles to stores in the southeastern United States. Acme normally produces between 8,000 and 10,000 cases of pickles a month but has the capacity to produce 12,000 cases without adding equipment or personnel. The owner of a twenty-store supermarket chain in Wisconsin, called Super Deals, visits friends in Florida and is impressed with the quality of "Florida's Best" pickles. He approaches you, an Acme Pickle account manager, with an offer to buy 2,000 cases of pickles to use in a special promotion at his stores. He is thinking of something such as: "Free jar of Florida's Best pickles with every purchase of forty dollars or more—this month only!" He offers Acme a price of $9.50 per case, knowing that it is a very substantial discount from the normal selling price of $20 a case. Acme's management is inclined to turn the offer down, because their cost is calculated at $10.00 a case. They believe they would lose money if they sold at $9.50 a case. You, on the other hand, believe that some errors have been made in the cost accounting. Your Role You are the account manager for Acme Pickles. Requirements Your analysis for the Controller and Sales Manager is needed to suggest a different way of calculating the pricing of the pickles that may be lower. As part of your analysis, address the following items: Explain why some production costs are variable and some are fixed. Analyze the benefit of recalculating the cost of pickle production. How would you recalculate it? What would the result be? What is the benefit to the company of recalculating the cost? Analyze how financial accounting of production cost differs from managerial accounting of production cost. Explain the difference between the two accounting methods. Identify the benefits and drawbacks of each method. Recommend a plan of action to management regarding Super Deals’ offer. Below is the cost report for a recent month. In this month, Acme produced 9,000 cases and sold them at $20 per case, which is Acme's normal selling price. Nine thousand cases are well beyond Acme's break-even point, enabling Acme to record a substantial profit at the nine-thousand-case level. Acme Pickle Company Cost Report Item Cost Cucumbers $15,000 Spices and vinegar 11,000 Jars and lids 10,000 Direct labor, paid by the case 30,000 Line supervisors, on salary 10,000 Depreciation on factory 10,000 Property taxes on factory 3,000 Insurance on factory 1,000 Total Costs: $90,000 Cost per case (9,000 cases produced) $10.00 Deliverable Format Your team lead wants to share this analysis across remote locations of the organization and is hoping you will set the standard for how analyses and decisions of this type should be presented and supported. Your team has requested either a recorded presentation (including slides and notes) or a presentation and supporting reporting that can be distributed as a model. Prepare a presentation of at least 9 slides using PowerPoint or software of your choice detailing your recommendation and the information you used to make your recommendation. You can either record your presentation or prepare a separate report supporting your slides. If you choose to record your presentation, you may use Capella-supported Kaltura Media or another technology of your choice that produces a shareable URL. Kaltura is recording software that can be used to create webcam, screen, and audio recordings. Refer to the MBA Program Resources for the Using Kaltura tutorial to prepare for this option. If you choose to use something other than Kaltura Media, ensure that it creates a shareable URL and can be embedded in the courseroom to ensure faculty can access your recording. Note: If you require the use of assistive technology or alternative communication methods to participate in these activities, please contact [email protected] to request accommodations. Recommendation requirements: Presentation slides: Create at least 9 slides detailing your recommendation and the information you used to make your recommendation. Include additional details as slide notes. Supporting information. Choose one of the following options: Record your presentation. Create a 2–3 page report to support your slides.

Paper For Above instruction

In this analysis, we explore the cost accounting practices of Acme Pickle Company, particularly in relation to a potential lower-priced offer from Super Deals. We examine the nature of variable and fixed costs, the benefits of recalculating production costs, the differences between financial and managerial accounting, and provide a strategic recommendation regarding the offer.

Understanding Variable and Fixed Costs

Production costs in manufacturing are typically categorized into variable and fixed costs. Variable costs change directly with the level of production; for example, raw materials like cucumbers, spices, and vinegar increase proportionally with the number of cases produced. In the case of Acme, expenses such as cucumbers ($15,000), spices and vinegar ($11,000), and jars and lids ($10,000) are variable costs since they fluctuate with production volume. Conversely, fixed costs remain constant regardless of production levels; these include salaries of line supervisors ($10,000), depreciation on the factory ($10,000), property taxes ($3,000), and insurance ($1,000). Recognizing which costs are variable vs. fixed is essential for accurate costing and decision-making, particularly when evaluating special offers that might impact production levels.

Recalculating Production Costs: Benefits and Methodologies

Reevaluating the cost structure entails moving from traditional absorption costing to a more refined approach such as variable costing or activity-based costing (ABC). Traditional costing often allocates fixed manufacturing overhead uniformly, which can distort the true cost per unit, especially at different production levels. Recalculation involves separating fixed costs from variable costs, thus providing a clearer picture of incremental costs associated with additional production or sales. For example, with total factory costs of $90,000 and production of 9,000 cases, the average cost per case is $10.00. However, fixed costs like depreciation are sunk costs—whether 9,000 or 12,000 cases are produced, these expenses do not change. Beyond the break-even point, additional units primarily accrue variable costs, making marginal cost analysis valuable for short-term decisions like accepting discounted offers.

Managerial vs. Financial Accounting of Production Costs

Financial accounting focuses on providing an overall picture of a company's financial position, adhering to external reporting standards such as GAAP. It allocates costs systematically, often using absorption costing, to determine net income. Managerial accounting, however, is internally focused and emphasizes decision-making. It frequently employs variable costing and detailed cost analysis to assess profitability, control costs, and support strategic decisions. The main benefit of financial accounting is transparency and compliance, while managerial accounting aids in operational efficiency. Drawbacks of financial accounting include potential distortions of unit costs due to fixed cost allocation, whereas managerial accounting’s detailed approach can be complex without standardized methods.

Strategic Recommendation on the Super Deals Offer

Given the above analysis, accepting the offer at $9.50 per case requires careful consideration. The company’s variable costs—primarily raw materials and direct labor—are likely below the offered price, suggesting that accepting the deal could result in covering these incremental costs and possibly contributing marginal profit. Fixed costs like depreciation and salaries are allocated costs that do not change with additional production. Therefore, if the actual variable cost per case, excluding fixed costs, is less than $9.50, then accepting the order could prevent excess capacity from remaining idle and contribute positively to fixed costs coverage. However, if the variable cost exceeds the offer price, or if acceptance jeopardizes existing pricing strategies, the decision would differ.

Conclusion and Action Plan

Based on the cost analysis, a recalibration of costs—using marginal cost analysis—is advisable for short-term decision-making. Since the fixed costs are sunk in the context of the current production capacity, focusing on the variable costs will better inform whether to accept the offer. The recalculated variable costs for raw materials and direct labor are likely below the $9.50 offered. Therefore, accepting the order might be beneficial, especially if it utilizes idle capacity and contributes marginally to fixed costs. Management should consider implementing a hybrid costing approach, separating fixed and variable costs, to support such tactical decisions in the future. Overall, the strategic recommendation is to accept the Super Deals offer, provided the variable costs are confirmed to be below the proposed price, thereby avoiding potential losses based solely on obsolete cost calculations.

References

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