Styling Toys, Inc

Essay

Styling Toys, Inc. (STI) manufactures a variety of electronic toys for children aged 3 to 14 years. The company started as a Ma & Pa basement operation, and grew steadily over the last nine years. It now employs over 100 people and has sales revenue of over $250 million. Samantha Marks, the CEO of STI also recognizes that competition has increased during this period; therefore future growth will not be easy.
Marks recognizes that one of the areas of weakness is the accounting and costing system. Marks' maternal uncle, Zack, had maintained the accounts for the company. He meticulously kept track of all the invoices that were received, payments made, and painstakingly prepared crude annual reports. With Zack passing away at the age of 85, Marks decided to hire a professional cost management expert to keep track of the company's costs. She hired Dona FalconWright, who had just completed her CMA.
After acquainting Falcon with the company and its people, Marks decided to get down to business. She called Falcon to her office to have a serious conversation about accounting and costing, in particular.
Marks: Dona, I would like you to pay particular attention to developing an official costing system. Currently, we don't have one. I believe this should be your first priority because competition is rising and if we do not understand our costs, we might start losing sales to our rivals.
Falcon: I understand your point very well, Ms. Marks.
Marks: Call me Sam.
Falcon: Very well, Sam. I have a few ideas that I picked up from my CMA courses that I think are worth implementing. However, it looks like we need to start with the basics.
Required:
Assume the role of Dona Falcon. Write a brief report outlining the basics of a cost management information system. Include in your report the following:
∙ Resources and costs
∙ Supply of resources vs. the use of resources
∙ Classification of costs (three dimensions of resources)
∙ Alternative costing systems