The manager of Sunshine bakery is disappointed with the reported net income for the period. The bakery recorded a loss for the period. The manager does not understand how demand can be so high for baked goods but profits low. Suggest reasons why the bakery high demand may not lead to profit. Recommend the type of analysis that should be done to pinpoint the problem.
The manager of Sunshine bakery is disappointed with the reported net income for the period. The bakery recorded a loss for the period. The manager does not understand how demand can be so high for baked goods but profits low. Suggest reasons why the bakery high demand may not lead to profit. Recommend the type of analysis that should be done to pinpoint the problem.
Introduction:
Activity-based costing (ABC) is a method of more exactly allocating overhead costs by allocating them to activities. Costs can be assigned to cost objects that use activities after they have been assigned to activities. The system can be used to target reduce overhead costs. ABC works best in complex environments with a large number of machines and products, as well as tangled procedures that are difficult to decipher. It is less useful in streamlined surroundings where manufacturing processes are streamlined and costs can be easily assigned.
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