Question

A grocery store’s analysis of a recent customer survey finds an increasing number of customers interested in being able to custom-order meals to go. Maria sees this as an opportunity to enter a niche market for busy families or individuals who want home-cooked meals with a variety of options and combinations, but who have little time. Maria already has an expansive deli, bakery, and prepared foods section in the store and sees this opportunity as a viable option to increase sales and its customer base. With meals to go, customers can choose from an array of options and can indicate the quantity of each item and the time of pickup. The customer simply pulls up in a designated spot at Maria’s and the food is brought to their car, packaged, and ready to take home to enjoy.

What type of costing system will work best for the Maria’s Market? What sales price information, cost information, and other options are important to this decision?

Answer 1

Answer: Maria is going to enlarge its operation base on the main objective of maria to increase the customer base anyhow for this price should be as least as variable cost or minimum price.For this maria should adopt Marginal costing system which will be best for maria as it prompts Maria to charge the only varial and it helps him to provide the cheap and best product to increase the customer base. Under marginal costing, costs are classified into fixed and variable costs. Variable costs are charged to the unit cost and the fixed costs attributable to the relevant period are written-off in full against the contribution for that period. The contribution margin indicates the recovery of the fixed costs before contributing towards the operational profit. This technique is widely used for internal management purposes for decision making rather than for external reporting.

Sales, cost, and other operating costs are very important to know as without which pricing of the product can not be set minimal. Competitor sales price and cost and operation expenses should be in the knowledge of the maria's as price should be less than to attract customers. Pricing should be done on variable cost basis no fixed overhead should be charged to the new venture. Price should be charged for varial portion like Direct material, direct cost, and variable administrative expense, other variable costs will help to fix the price.