Business Plan for Brownie Cookies

Student Name

Institution

ACC 5301 Management Applications of Accounting

Instructor

Date

Abstract

The plan compares two costing methods: job order costing and process costing. From the analysis, job order costing indicates that the cost of producing one unit is lower compared to when process costing is used. The job order costing approach primarily focuses on the material and labor inputs that go into making one unit. Hence, the system offers a true reflection of the actual cost of produce ng the cookies. From the data, the cost of one team will be $0.72. The selling price will be $1.25 the company will be making a profit of $0.53 per cookie. The company will optimize its profits by increasing the level of sales. The company's growth will depend on product uptake in the markets, which the marketing approaches will also influence. In addition, the company will endeavor to optimize its sales capacity to boost its profitability, an aspect that influences its growth.

Business Plan for Brownie Cookies

Setting up a successful business requires an entrepreneur to be conversant with determining costs, mapping them to the various cost elements, and calculating profits and losses. The company's evaluation should be objective and transparent to identify the strengths and weaknesses of the entity. This project pertains to a cookie business, which entails baking cookies and retailing them in markets. Therefore, the revenue model of the business involves receiving proceeds from sales. The decisions made by the company on production and sales depend on market forces and its operational capacity.

Part 1 Establish Cookie Business

The name of the business will be Brownie Cookies. The company will be based in Atlanta, Georgia. The business's mission is "To provide high-quality cookies that inspire people to bake and share." The mission statement is informed by the need to use cookies to unite community members and share what they have, as the company will be operating for profits. It will also be motivated by the need to connect with community members by sharing its products. In addition, the company will target the young population, especially college students. The popularity informs the target population of cookies amount young people who snack frequently.

Part 2 Costing and Sales Information

The estimated cost per cookie with job order costing is $ 0.72. On the other hand, the cost per cookie when using a process costing is $0.81. The difference in price arises from the change in the amounts charged for the overheads. In process costing, the costs allocated to the relevant department are spread. Therefore, a higher process cost is assigned to a finished product, thus increasing the item's overall cost. Thus, for the company to make profits equal to those of job order costing, the management will have to raise the price of one cookie by $0.09. The price increase could, however, discourage customers from purchasing the product. Hence, the job order costing method is ideal for the Brownie Cookies company as it offers a true reflection of costs per unit.

Part 3 Compare and Contrast Costing Methods

The Job Order costing will assign direct costs to the individual items and jobs. Hence, it will track the cost elements of the products will d to determine the cost of developing a single product. In Job Order costing, manufacturing overhead costs are also applied to the individual products (Greenberg & Schneider, 2010). On the other hand, process costing entails assigning the expenses to various batches, especially to the production departments (Dosch & Wilson, 2010). In this case, will be given the manufacturing overheads to the relevant activity bases.

The Job Order costing model will be ideal for this business. The Job order costing model will benefit the company by facilitating accurate reports on the profits realized from individual operations. Furthermore, the approach will help assess the performance of employees and benchmark their activities. The model will also be essential in the measurement of indirect costs. Therefore, the job order costing model will facilitate monitoring the costs involved throughout the manufacturing process.

Part 4 Impact of Increase and Decrease in Sales

Given the company will rely on job order costing, an increase in sales will help increase the profits realized by the company. Considering the production cost of $0.72 and selling them at $1.25, the number of units sold will determine wider profit margins. However, an increase in sales may also increase the logistical requirements for the company, for instance, the need to have a more elaborate approach to the sourcing of raw materials. Such conditions may increase the overhead costs of running the firm. Conversely, a decrease in sales will also decrease the level of profits realized by the company. Hence, for Brownie Cookies to operate sustainably, it will be necessary for the management to embark on a marketing strategy that focuses on aggressively driving sales since that will directly influence profit-making. The reduction in sales will limit the company's profit-making potential, thus derailing its growth.

Conclusions and Recommendations

The company will be making a profit of $0.53 from every cookie sold from the illustrations. Considering the production cost as determined by the two costing methods, Brownie cookies will be making a profit equaling roughly 50 percent of the production costs. The profit margins offer positive prospects to the company due to the good returns from its operations. However, the company can progress by adopting new approaches and implementing expansion strategies.

One of the measures the company can take to ensure optimal profits is standardizing raw materials and labor prices. Having reasonable control of the input prices will ensure that the company does not experience fluctuations in cost obligations in its production process. For instance, a potential upsurge in the prices of commodities without prior anticipation by the company will suppress the profit-making potential of the firm. Hence, Brownie Cookies should establish a reliable supply chain to ensure that the sourcing strategy for the raw materials does not subject the firm to the risk of sudden price hikes. Besides, the company will have formal contracts with employees, an aspect that will standardize their remunerations to avoid fluctuations in labor costs. Finally, the pricing strategy for the company should favor the target population. Potential price increments should be reasonable and considerate of their income status. Furthermore, to boost sales levels, the company should create a good relationship with the community through Corporate Social Responsibility initiatives.

References

Dosch, J., & Wilson, J. (2010). Process costing and management accounting in today's business environment. Strategic Finance, 92(2), 37-44.

Greenberg, R. K., & Schneider, A. (2010). Job order costing: A simulation and vehicle for conceptual discussionAcademy of Educational Leadership Journal, 14(3), 39.

Job Order Cost Sheet
Job number:
Direct Material		Direct Labor		Manufacturing overhead
Ingredients	Total CostCost per ingredient		Date	Hours	Rate	Total CostCost per employee			Total Cost
		<2 employees>				<30% of Direct Labor Costs>
Flour
Sugar
Fat
Milk
Eggs
Total						-			-
Cost Summary
Direct Materials	-					5.73			5.73
Direct Labor	-					13.13			13.13
Manufacturing Overhead	-					11.46			11.46
	-					30.32
Units	1,000								42 Units
Cost per unit	-								0.72