Unit 2 Case Study

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1 Unit 2 Case Study: Visit 1 and 2 Ashley Oquendo Post University ACC211H: Managerial Accounting Mary Leone July 10, 2022

2 Unit 2 Case Study: Visit 1 I was famished and decided to get something fast. I decided to get my original number 2B at McDonald’s, a quarter pounder with cheese and bacon meal. I went there with a mentality of how McDonald’s truly works. I never worked there myself, so I wonder how this successful business has been widely known and famous for years. I do not see this brand ever going away. McDonald’s has won the hearts of the whole world. So how does their operation truly work? I was walking in up to the register to order my food. I looked at all the employees and what makes everything work to give orders. The power is what makes McDonald’s strive. Electricity is an example of unit-level activities. They need electricity to take my order, make my food, keep it warm, and let the workers see what they are doing to prepare this delicious burger I am about to order. Costs related to unit-level activities refer to the amount of electricity used, machine hours, and labor hours (Brewer, 2021). Without unit-level activities, they wouldn’t be unable to produce any orders. How can any fast-food company strive without having something simple like electricity? It makes them keep creating so many demands and collecting costs to make the products. I ordered my meal and had to wait for it to be prepared. I observed all the workers needed to prepare my food and everyone else’s food. Even though many products are produced, each order is made the same, which relates to batch-level activities. The food is prepared on a production line, making the same products that customers order. Then it is handed to the expo to bag the food, ensuring all products are in the correct order. The workers then place napkins, sauces, and straws in the bag and hand it to the customer with the order number. Batch-level activities costs depend on the number of orders and not the batches of food. The cost of

3 processing a purchase order is the same, no matter how many units of an item are ordered (Brewer, 2021). After receiving my order, I went to get something to drink from the soda fountain. I always drink the Orange Hi-C from McDonald’s and know if it does not taste right. It needed to be changed out, so I got the attention of one of the workers to change out the drink. They proceeded to test the machinery to see if it worked correctly. This is an example of product-level activities. We all know they are constantly having problems with their ice cream machine going down and saying it is out of order, but this is another piece of machinery they use to produce products. They need to buy parts to fix their forever-down ice cream machine (To be honest, it is always down when you want ice cream from McDonald’s). Costs relate to specific machinery companies use and must be carried out to meet customer needs (Brewer, 2021). First, they must test the machinery and then order parts to fix it to keep customers happy and spending money. Sitting down and finally enjoyed my meal in the restaurant. I noticed the booths were torn, the flooring had cracks, and there was an out-of-order sign on the restroom. I understand that I am not at a fancy restaurant, and high-volume stores will have building depreciation. This is considered part of facility-level activities. Facility-level activities include the manager’s salaries, property taxes, and insurance. These costs must be carried out and are required to arbitrarily allocate products (Brewer, 2021). These activities tie into all other activities to keep businesses running like McDonald’s.

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4 Unit 2 Case Study: Visit 2 I was hanging out with a group of ten friends, and we decided to go to a restaurant. We all ordered something wholly different and enjoyed our meal. The server came to our table at the end of the meal and asked us how we would like to pay the bill, and we had two options: Either divide the bill up accordingly or split the bill equally. We asked the server to come back after deciding how we would like to pay. The more equitable approach would be to divide the bill accordingly because one person might not have ordered a more expensive meal. Suppose everyone at the table ordered something more expensive. In that case, the person who called something cheaper will have to pay a significantger price than those who ordered something more expensive. Also, the higher the bill, the higher the tip to provide and taxes to be paid. Most of us agreed to each take care of our accounts. As a former server, the most straightforward system is to have a big party split the bill equally with the party. It is time-consuming to figure out which person is taking care of what. To split the bill and have multiple payment options. Calculating the bill and dividing it by each party member is easy. The server might not get a bigger tip, but it makes the turn-and-burn process quicker to get another party in their section. The system to split the bill equally relates to the traditional cost system. Due to the fast and easy way and can be quickly figured out, it relates to a traditional costing system that most businesses use. To figure out which each person ordered is more like the ABC model. It takes longer to calculate and find out each cost spent by each customer, including excess fees. Also, gravity needs to be figured out depending on the restaurant. So, all these extra calculations pertain to a more accurate bill and system to use in an ABC model.

5 References Brewer, P., Garrison, R., & Noreen, E. (2021). Introduction to Managerial Accounting (9 th ed.). New York, NY: McGraw Hill Education, LLC.

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