Assignment 1 Cost Flows in an Organization

Assignment 1 Cost Flows in an Organization

The company of choice is Flymax limited that operates in the First Moving Consumer Goods, specializing in the production of brown wheat breads. With no branches, all operations of the company are handled at the head office, where production, finance and sales department are located. Production department is the best field based on my experience and qualification. Assignment 1 Cost Flows in an Organization

Bakery’s costs associated with the production of brown wheat breads include ingredients, supplies and packaging materials, electricity, and payroll. Process costing is adopted in Flymax limited. Process costing is appropriate in cases where there is production of homogenous goods that are produced through a continuous process (Drury, 2013). The cost per unit is calculated as the average costs of the total number of units produced within a certain duration of time. The method identifies and accumulate all costs (direct and indirect costs) to the manufacturing process. In addition, this method allows mangers to compare production costs between different periods (Joung, Carrell, Sarkar & Feng, 2013). Adoption of this costing model would enable mangers to match the product costs against the sales revenue realized.

In this type of company, the various types of direct costs include ingredient and direct raw materials, packaging and labeling costs, direct utilities such as power and water, direct labor incurred. On the other hand, indirect costs incurred may include taxes and insurance costs, costs associated with work place improvements, costs of machinery installation and rent expenses among others.

Activity-based costing would be used to allocate overhead costs. This method identifies all the operations incurring overhead costs to manufacture a product. This ensures those products that do not accrue such costs are exempted from such costs (Woodruff, 2018). Compared to other tradition costing method, activity based costing ensures that each division is held accountable of all cost incurred per department (Hofmann & Bosshard, 2017).

ESSAY