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

For a business involved in providing highly customised products, the data related to the costs for such businesses is collected using a job order cost system. It allows for estimating and collecting cost for each individualized product.

For custom ordered products, the sales price determination is done using the knowledge acquired regarding cost of material, labour and overheads.

This system is opted since the cost incurred on each job would be different, therefore cost for each job would be varied and this the price charged would vary as well.

To estimate the cost, information required for Maria’s would be the knowledge for cost of each ingredient, labour time invested on an average for each product.

Plus, the quantum of sale of although customised product, but with some similarity. All of this is required for cost ascertainment.

Time requirement for each job is also needed in this method.