Chocloate case study
ISSUES IN ACCOUNTING EDUCATION
Vol. 28, No. 3
2013
pp. 637–652
American Accounting Association
DOI: 10.2308/iace-50464
Dream Chocolate Company: Choosing a
Costing System
Kip R. Krumwiede and W. Darrell Walden
ABSTRACT: This case is about a small, but real, company, Dream Chocolate (D.C.), which makes custom-labeled, high-quality candy bars for special events and advertising purposes. Like many small companies, D.C. has an inadequate costing system and needs a much better one as it starts to get bigger orders. In Part A of this case, students learn how to analyze a company’s situation, identify relevant information in a case that is presented in a less-structured format, evaluate the pros and cons of different costing approaches, recommend an approach, and suggest ways to implement it. In Part B, they develop and calculate costs based on their recommended approach. The case also helps increase students’ understanding of the applicability of various costing methods typically covered in cost and managerial accounting courses.
Keywords: instructional case; cost accounting; job order costing; process costing; operation costing; activity-based costing; and accounting information systems. INTRODUCTION
K
ay Johnson sat back in his chair wondering about what he had just done. He accepted a special order from a national supplier of wellness products for 200,000 chocolate bars at a
20 percent discount from the usual price. It is a new type of bar and the company provided the recipe. The company also hinted about a second order for 150,000 bars if the first order was successful. Kay sighed and thought, ‘‘I hope we can make a profit on this order, because we are going to have to increase our capacity big-time to fill it. Wish I knew what the cost will be.’’
OVERVIEW OF COMPANY
Dream Chocolate (D.C.) is the major product line of Salmon River Foods, the spawn of a trip on the Middle Fork of the Salmon River in Boise, Idaho. President Kay Johnson was burned out by
30 years in
Vol. 28, No. 3
2013
pp. 637–652
American Accounting Association
DOI: 10.2308/iace-50464
Dream Chocolate Company: Choosing a
Costing System
Kip R. Krumwiede and W. Darrell Walden
ABSTRACT: This case is about a small, but real, company, Dream Chocolate (D.C.), which makes custom-labeled, high-quality candy bars for special events and advertising purposes. Like many small companies, D.C. has an inadequate costing system and needs a much better one as it starts to get bigger orders. In Part A of this case, students learn how to analyze a company’s situation, identify relevant information in a case that is presented in a less-structured format, evaluate the pros and cons of different costing approaches, recommend an approach, and suggest ways to implement it. In Part B, they develop and calculate costs based on their recommended approach. The case also helps increase students’ understanding of the applicability of various costing methods typically covered in cost and managerial accounting courses.
Keywords: instructional case; cost accounting; job order costing; process costing; operation costing; activity-based costing; and accounting information systems. INTRODUCTION
K
ay Johnson sat back in his chair wondering about what he had just done. He accepted a special order from a national supplier of wellness products for 200,000 chocolate bars at a
20 percent discount from the usual price. It is a new type of bar and the company provided the recipe. The company also hinted about a second order for 150,000 bars if the first order was successful. Kay sighed and thought, ‘‘I hope we can make a profit on this order, because we are going to have to increase our capacity big-time to fill it. Wish I knew what the cost will be.’’
OVERVIEW OF COMPANY
Dream Chocolate (D.C.) is the major product line of Salmon River Foods, the spawn of a trip on the Middle Fork of the Salmon River in Boise, Idaho. President Kay Johnson was burned out by
30 years in
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