I need help with the operations cost system calculations from the...

I need help with the operations cost system calculations from the attached Dream Chocolate case. I don't even know where to start.

Dream Chocolate Company: Choosing a
Costing System
ABSTRACT: This case is about Salmon River Foods ("D.C.") , a small company that
makes the Dream Chocolate line of 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, you will analyze the company’s situation, identify relevant information 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, you
will develop and calculate costs based on your recommended approach. Working
through this case will help you to increase your understanding of the costing methods
covered in ACC 350 by providing a real-world setting in which to apply your knowledge.
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 was a new type of bar and the c ustomer
provided the recipe.
The c ustomer 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 the food service industry and decided to sell his business and begin anew. Quite by
accident, he received a call asking if his new company Salmon River Foods would consider selling
Kip R. Krumwiede and W. Darrell Walden are both Associate Professors at the University of Richmond.
We thank David E. Stout, Shannon L. Charles, and Nick Fessler for helpful comments. We also thank Kay Johnson,
owner of Dream Chocolate, for his support throughout the project.
This case is based on a real company, but quantitative information used in the case is disguised for confidentiality
purposes.
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Kip R. Krumwiede and W. Darrell Walden
A s assigned i n ACC 350 - Spring 2014 (Makridis) at Arizona State University