Caprock Cycle Company is a family owned bicycle manufacturing company based out of Caprock, TX which has been in the in the line of business of producing first rate racing bicycles for many years. This company was founded on building high-quality, reliable bicycles that were fairly priced and of high quality. In anticipation of their impending retirement, the original owners of Caprock Cycle Company have named their son and current manager Bryan Sanders as President of the company in hopes that his recent success in the Tour de France will break their recent stagnation in sales.
When Bryan was promoted to the role of…show more content… He wants to charge this low price for the Racer because he is limited in his competitive ability as he is locked into another competitive struggle because pricing for the Tourist which starts at $530 is only slightly above their breakeven point. In his efforts to make sure he can be successful with the new Racer implementation, Bryan hires B.D.H.T, LLP to show him the best way to breakdown his costs and see if turning a profit is possible and what costing method should be used to do so.
Executive Summary After analyzing three different costing methods for Caprock Cycle Company, we have made some observations and gathered some suggestions concerning the profitability of Bryan’s company. Process costing, job costing, and activity-based costing are the three methods we used to compare profitability for Caprock Cycle Company.
Figure 1.1 Process Costing Tourist Racer
Revenue $ 4,770,000 $1,600,000
Cost of Goods Sold:
Cost per unit $516.70 $516.70
Units Sold 9,000 1,000
Total Cost of Goods Sold $4,650,000 $516,700 Gross Profit $119,700 $1,083,000 We began with the process costing method, which was being used by Caprock’s accountant, Linda. The process costing method is common in industries that produce large amounts of similar or identical outputs. In the calculation of process costing,