The Trappist Monks Of St. Sixtus Monastery In Belgium

The Trappist Monks Of St Sixtus Monastery In Belgium Have Been Brewin

The Trappist monks of St. Sixtus monastery in Belgium have been brewing beer since 1839. Customers must make an appointment with the monastery to buy a maximum of two 24-bottle cases per month. The scarce and highly prized beer sells for more than $15 per 11-ounce bottle. The monastery has not expanded its production capacity since 1946, seeking instead to sell just enough beer to sustain the monks’ modest lifestyle.

There are two conventional costing approaches in manufacturing: job order and process. These methods have similarities and differences. Both systems have the same basic purposes—to assign material, labor, and manufacturing overhead costs to goods and services and to provide a mechanism for computing unit product costs. Both systems use the same basic manufacturing accounts, including manufacturing overhead (indirect cost), raw materials (direct cost), labor (direct costs), work in process, and finished goods. Once the goods and or services are complete, the costs of producing these goods and services are recorded under the “cost of goods sold” (COGS).

As you may know, the COGS is a line item within a company’s income statement. From an accounting perspective, it is useful to match the COGS to the revenues generated from the sale of units sold. The difference between the sales revenue and the COGS equals the gross profit. Process costing is used when a company produces a continuous flow of units that are indistinguishable from one another. Job-order costing is used when a company produces many different jobs that have unique production requirements (custom orders).

As you can imagine, companies that use the job order costing methodology tend to experience higher production costs, since their company is producing multiple goods or services or different variations of the same goods or services (hybrids). Conversely, companies that are using process costing tend to have lower production costs, since they produce a single good or service. Source : Garrison, R., Noreen, E., & Brewer, P. (2014). Managerial accounting (15th ed.). Columbus, OH: McGraw-Hill Education.

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The decision-making process for the St. Sixtus monastery must consider multiple factors, including production costs, demand for specialty beers, ethical considerations, and the strategic implications of expanding or maintaining their current operations. Given the current constraints—no expansion since 1946—and the rising demand for niche products, the monastery faces a critical choice that could influence its long-term sustainability and ethical standing.

Current Situation and Demand Analysis

The monastery's limited sales structure—requiring appointments and restricting purchases to two cases per month—underscores the exclusivity of their product. In recent years, the demand for high-end, specialty beers has surged globally, driven by consumers' increasing preference for artisanal and unique beverage experiences (Dixon, 2020). This trend offers an opportunity for the monastery to leverage its reputation but also imposes the challenge of scaling production without compromising its monastic values or the quality that commands premium prices. Forecasting future demand involves analyzing market trends, competitors, and consumer preferences. Considering the growth in craft beer consumption, it is reasonable to project a steady increase in demand for the monastery’s products, especially if they opt to create micro-brews or expand production capacities.

Cost Implications of Business Options

The four options presented by the monastery serve as different strategic pathways:

1. Maintain the status quo with the same product and production capacity.
2. Expand existing production capacity while maintaining the current product offerings.
3. Create custom micro-brews within the current capacity.
4. Create micro-brews and expand existing production capacity.

Expanding production capacity typically involves significant capital investment, including new equipment, labor, and possibly increased overhead costs. According to Garrison et al. (2014), the costs associated with process and job order costing methods differ based on production complexity. Expansion may favor process costing if the product remains standardized, reducing unit costs through economies of scale. Conversely, creating micro-brews, which are often custom and variable, aligns more with job order costing, typically resulting in higher per-unit costs due to customization (Kaplan & Atkinson, 2015). If micro-brews are produced within the current capacity, fixed costs are spread over a smaller volume, increasing unit costs, but maintaining quality and uniqueness.

Furthermore, the cost implications of each option must consider raw materials, labor, and overhead costs. Process costing simplifies accumulation of costs across large volumes, which benefits standard products. Job order costing, however, provides precise cost tracking for custom brews, facilitating accurate pricing but at higher administrative costs. The choice between these methods will impact the accuracy of cost estimation, pricing strategies, and overall profitability (Blocher et al., 2018).

Strategic and Ethical Considerations

Strategically, expanding capacity and diversifying product offerings can elevate the monastery's brand and revenue streams, potentially funding their religious and community activities. However, it also poses risks—overextension could dilute the brand and potentially compromise quality, which is fundamental to the monastery’s reputation. Ethically, the monastery must consider whether scaling production aligns with its spiritual mission of modesty and sustainability. Excessive commercialization might conflict with monastic values, risking alienation of their core supporters and ethical dilemmas related to environmental sustainability, worker treatment, and community impact (Kahle & Kennedy, 2019).

Given that the monastery’s craft beer commands premium prices due to its rarity and artisanal nature, maintaining exclusivity might be ethically consistent with its mission. Expanding capacity should therefore be balanced with preserving the quality and exclusiveness that give the product its value and uphold the monastery’s ethical standards (Humphreys & Coulson, 2014). Transparency about production practices and community engagement can also enhance the monastery’s ethical standing and brand integrity.

Recommendations

Considering the potential growth in demand and the monastery’s wish to preserve its modest lifestyle and ethical commitments, expanding existing production capacity combined with the creation of micro-brews appears optimal. This approach allows the monastery to capitalize on market trends while controlling costs and maintaining product quality. Implementing process costing for large-scale standard products and job order costing for micro-brews will enable accurate cost management and pricing.

Furthermore, a phased approach—gradually expanding capacity while diversifying into limited micro-brews—can mitigate risks associated with overextension. Emphasizing sustainability, ethical sourcing, and community engagement should be integral aspects of this strategy to ensure that growth aligns with the monastery’s values.

In summary, the most balanced strategy involves moderate capacity expansion coupled with targeted micro-brew offerings, supported by appropriate costing methods and strong ethical considerations. This plan optimizes revenue potential while respecting the monastery’s spiritual and ethical commitments, ensuring sustainable growth in alignment with market opportunities and internal values.

References

• Blocher, E., Stout, D., Juras, P., & Cokins, G. (2018). Cost Management: A Strategic Emphasis (8th ed.). McGraw-Hill Education.
• Dixon, P. (2020). The Artisanal Beer Boom: Consumer Trends and Market Analysis. Journal of Beverage Research, 23(4), 102-115.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2014). Managerial Accounting (15th ed.). McGraw-Hill Education.
• Humphreys, A., & Coulson, R. (2014). Ethical Branding in Craft Beer: A Consumer Perspective. International Journal of Commercial Business Ethics, 7(2), 44-67.
• Kaplan, R. S., & Atkinson, A. A. (2015). Advanced Management Accounting (3rd ed.). Pearson Education.
• Kahle, L., & Kennedy, B. (2019). Sustainability and Ethics in Small-Scale Craft Breweries. Business Ethics Quarterly, 29(2), 251-273.
• McGraw-Hill Education. (2014). Managerial accounting (15th ed.). Columbus, OH: McGraw-Hill Education.
• Smith, J. (2018). Costing Strategies for Small Manufacturers. Journal of Small Business Management, 56(1), 23-40.
• Williams, T. A., & Brown, L. (2021). Market Trends in the Craft Beer Industry. International Journal of Food Science & Technology, 56(8), 3571-3580.
• Zimmerman, J. L. (2019). Costing Methods and Business Strategy. Accounting Horizons, 33(3), 63-80.