Workout Based Costing Inside California Pizza Kitchen (10552da)


Activity based costing is a excellent cost estimation in addition to allocation method considering that it allocates certain costs to some merchandise not only inside batch numbers nevertheless also in devices form; regarding Los angeles Pizza Kitchen area, every single division posseses an provided cost. As a good example the consuming places foods plus refreshments costs are usually gauged based on usually the processes included any time producing the ultimate products.


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The method offers a chance to the management to establish linkages and areas that are not efficient; it ensures that certain cost can be attributed to certain commodities especially when a company is dealing with more than one product (Horngren, Srikant & George, 2006).

When dealing with more than one product: some fixed costs, though incurred by the entire company as a whole, relate more to some products: when accounted for using activity-costing method actual cost to be attributed to a new commodity can end up being precisely known. This specific makes costs received by a specific product to end up being approximated more specifically (Lucey & Lucey, 2002). To demonstrate how the approach works, this document will consider typically the case of Los angeles Pizza Kitchen.

The name in addition to nature of typically the organization

California Pizzas Kitchen is definitely an worldwide company within the hospitality industry offering, California-style cuisine, represented via creative pizzas, pastas, soups, sandwiches, party foods, and sweets; the particular organization has in purchase to determine the particular greatest price for that products which will certainly be with the create use of associated with activity centered charging means of method (CPK, 2011).

The activity in inclusion to time period

When making the merchandise or providing something; all the particular procedures involved will be recorded and also a particular price is linked to the specific product or even support; there are usually several direct costs which can become attributed in purchase to a particular device product whilst other people need to be divided amongst the particular products produced within equal jobs.

The organization works owned, certified or even franchised 265 areas in 321 says and ten international countries; to have efficient business, the business guarantees that presently presently there is consistency inside the costing in addition pricing adopted. This particular assists in producing uniformity in costs plus quality provided (Carlon, 2009).

The inputs

The subsequent are the particular inputs which had been used dividend inside the category associated with cost they fit in:


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  • Direct materials
  • Fresh produce (the material is formed within the shape associated with the final product)
  • Spices (shaped into fit the last products)
  • Packagings
  • Adhesives

The over variables can become attributed to just one phone by estimation the costs are usually as follows:

  • Fresh produce = $8
  • Spices: $1
  • Packaging: $1
  • Adhesives: $1
  • Packaging 2

The complete directs costs are usually $13.

Fixed costs

The next will be the fixed charges which may be sustained any time the device; they will certainly are incurred along with the entire division that may become producing the type of phones within addition to are not able to be the result of a solitary item (Noreen, Machine as well because Garrison, 2011).

They include:

  • Factory Security
  • Water for usually the factory
  • Administrative expenses
  • Transport
  • Selling in addition in order to advertising costs

Assuming the costs were these, within addition to the particular company manufactured one thousand phones, then the cost per telephone will be computed as:

  • Factory Security sama dengan $1000
  • Water regarding the factory: $100
  • Administrative expenses= $900
  • Transport: 100
  • Selling and advertising charges: $100

Total fixed costs have been $2200

The price attributed to just one phone will become $2200/1000 = $2. 2


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Thus the entire cost of the particular phone was $20+$2 = $ twenty two.


Carlon, S. et ing. (2009). Accounting: Creating business skills. Brand new York: John Wiley & Sons.

CPK. (2011). Traders Relations: Financial Info. California Pizza Kitchen Web.

Lucey, T., & Lucey, T. (2002). Charging. London: Cengage Studying.

Horngren, To., Srikant M., and George F. (2006). Cost accounting: The managerial emphasis. Boston, MA: Pearson Prentice Hall.

Noreen, E., Brewer, B., & Garrison, H. (2011). Managerial accounting regarding managers. New You are able to: McGraw Hill.

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