In a business setting, we are often asked to write a memo to communicate with internal and external professionals. Therefore, I felt it especially beneficial for you to practice writing a memo dealing with our managerial accounting concepts.

Background:

Currently, you work at Shoes Unlimited (SU), which manufactures seasonal and sport shoes for men, women, and children. You're a senior accountant in the accounting department and have been with the company for eight years. Since the company's inception twelve years ago, SU has operated under a traditional costing system based on machine hours. With the effects of COVID-19, company growth, especially on-line sales, has really taken off. Monica Wright, the controller hired last year, is always willing to collaborate with the team on new and innovative company ideas. In fact, she welcomes communications to discuss how the company is doing and what, if anything, the company could or should be doing differently. This is your chance to make a good impression on the controller and management! It is your understanding that Michael Freeman, the company CFO, has submitted paperwork for retirement. Therefore, there will be opportunities for people to move up or change positions within the company. You may have an interest in the controller position. You want to propose to the current controller the idea of evaluating SUs costing system. Perhaps, it is time for a change. You briefly mention your idea to the controller. Monica is excited about your initial comments and asks that you send her something in writing. The controller asks that you put your ideas in a memo to her. In turn, she will consider and include you on more research/analysis for the two of you to present to the senior management of the company.

In consideration of the background, prepare a memo in a Word document to submit to the controller. Explain your thoughts for the company as it relates to various forms of costing systems available to the company. Specifically, discuss the traditional costing system as it compares with an Activity-Based Costing (ABC) system. What are similarities / differences and advantages / disadvantages of the systems? Based on your analysis discussion, would you have a recommendation on whether the costing system be evaluated now? Why or why not? What would be in the best interest of the company now that the effects of COVID-19 on the accounting department have stabilized. Be sure to support your comments.