MAIN QUESTIONS

In this case, you shall focus on two parts: Product Costing, and Special Orders. It would be too much of work if you are required to do the evaluation part and conclusion also. The following are the information that will help you with the project:

Part 1: Product Costing

Write a draft of a memorandum that Smith can present to her colleagues and higher management to support her case. The memo should include, but not be limited to:

• An analysis of current product costing approaches used at Fine Foods,
• Changes she should recommend (hint: Fine Foods already has a form of ABC that is unnecessarily complicated and complex and produces questionable benefits), and
• The extent to which the commended changes would resolve her concerns.

Part 2: Special Orders

Write a draft of a memorandum that Smith can present to her colleagues and higher management that focuses on what Fine Foods calls special orders. The memo should include, but not be limited to:

• A description of the accounting and other considerations with respect to special orders.
• A brief definition of the terms byproducts and joint products and the extent to which there items apply to special orders at Fine Foods. Hint: Do NOT use textbook definitions. Pay attention to the irrelevant costs, relevant costs (vs. selling price), total costs (which may be misleading). Don't forget teh opportunity costs.
• Identification of all the benefits that Fine Foods receives from special orders.
• An analysis of the way Fine Foods handles its special orders and any recommended changes.

Figure 1 Fine Foods, Inc. Organization Chart Top Management Research & Development Finance Human Resources Supply Chain Management SMU 1 SMU 2 SMU 3 Marketing/Sales Marketing/Sales Figure 2 Production Process for Product MP Raw food and ingredients Packaging material Production line 1 Recieving raw food Production line 2 Preparation of the raw food and moving with ingredients (Temporary warehousing Production line 3 Cooking MP and similar products Production line 4 Packaging MP and other products within the same product group Product MP finished and delivered Other processes Other packaging Other products Table 1 Fixed Production Costs Allocated to Products Table 2 Contribution Margins and Operating Profit Workshop Storage Gross Sales Environment (Standard discounts Electricity (Activity discounts Maintenance Mechanics (Special discount activities for customers) Quality Net Sales Engineering (Variable manufacturing cost) Production Line Maintenance (Fixed manufacturing cost Production Line Cleaning (Freight out) Lower Production Management Contribution Margin 1 Handling Raw Material Department (Media) Production Office Services (Sales promotion Production Manager and Related Costs Contribution Margin 2 Warehouse/Storage (Marketing and sales Internal Logistics/Resource Planning Contribution Margin 3 (Top management) Sanitation Vehicles (Business administration) Building Maintenance (Information system Steam Boiler (Human resources (Supply chain (Production) (External logistics for finished goods) (Mark up - Manufacture expenditures) (Other fixed costs Contribution Margin 4 (Structural costs) (Total depreciation Operating Profit