Question: Read the information on pages 637 - 645 in the Dream Chocolate case and complete the three action items (A1-A3) in Part A on pages 643 - 645.
Part 2: Complete action item B.1 in Part B on page 645. The work for this action item must be based on the approach (es) selected by your group in completing action item A2.
Part A: Choosing a Costing System
A1: What Information Does D.C. Need?
Before recommending a cost system, it is helpful to understand the cost information needs of the company. Based on case information, briefly summarize D.C.'s competitive environment and its apparent strategy in response to that environment. Considering the company's strategy and products, what types of cost information should D.C.'s product costing system be able to provide?
A2: Which Costing Approach(es) Do You Recommend?
a: Discuss the pros and cons of the different costing approaches available to D.C., including job order costing, process costing, operation costing, and activity-based costing.
b: Based on your analysis of costing approaches, which approach do you recommend D.C. use for direct costs? What about indirect costs? Provide support for your recommendation. Keep in mind it is a small company with limited staff and they do not currently track actual cost information during production. The approach should also be flexible enough to handle high-volume or low-volume months.
c: Discuss how you would handle different types of special ingredients, stir-ins, or labeling design costs for the new special order from the wellness company. You do not need to state how you would handle each specific ingredient.
A3: Summary and Implementation
Summarize your recommended costing approach and discuss how it will help Kay determine more accurate products costs for pricing different types of orders. What specific steps would you take to implement the new product costing approach? Hint: think about what new information would need to be collected and how you would collect it.
Part B: Calculate Product Costs
B1: Compute New Standard Product Costs
a: D.C. does not currently track actual cost information, but Kay has estimated some additional production data provided in Table 5. Using the approach(es) you recommended in Part A and the estimated data provided in Tables 1-5 and the Case, use Excel to compute estimated
total cost, profit margin, and margin percentage for each of the four jobs identified in Table 5, Panel A.
b: Compare your costs and profitability per bar to Kay's estimates in Table 4. What is the potential financial impact of using your method instead of Kay's?
Information related to above question is enclosed below:
Attachment:- DreamChocolateCase1.rar