Distribution of Beverages to its Retail Customer Case Study

Distribution of Beverages to its Retail Customer - Case Study Example If it offers a discount or charges less price for its products from one of its customers then it has to charge a lower price for its entire customer which will result in a loss for the company. The current costing method that is adopted by Johnson Beverage Inc in order to analyze the costing and profitability of the business and understanding the cost of the business that is underlying in order to analyze the cost and the income drivers. Therefore an in-depth knowledge is required in order to understand the profitability as per the stock keeping unit. For the improvement and development of the costing and profitability of the business, the company has adopted job order costing. JBI uses or adopts this costing as it assists JBI in analyzing and evaluating the net cost of its manufacturing process over a definite period of time. Under this method of costing the accurate cost that is incurred in the cost of production of the particular unit are maintained. JBI adopts both job order costing and process costing for different parts of its operations. The main disadvantages of applying or adopting this method of costing are it is very difficult or critical in identifying the overall activities that are undertaken that influences the cost of performing this activity. It is very critical in identifying the preferable cost drive that will evaluate or analyze the cost on the basis of the various activities. JBI mainly adopts fixed cost method for its billing purpose in order to analyze the fixed cost for all its activities and it analyzes and finds out the reason for variations in price. It allows the company in leveraging its efficiency and expertise in order to gain competitive advantage. Relevant costing may be defined as the cost that will influence the decision making of the company. The most relevant and best-costing method that JBI  should adopt on the basis of Exhibit 1 and Exhibit 2 is Activity-based costing. It can be observed that in Exhibit 1 that the cost of the goods is subtracted or deducted from the revenue in order to generate the gross margin. It also calculates the customer profitability of the company.