For Prof. Nicholas Only3

Price Costing

2-3 paragraphs

Stellar Packaging Products and its primary customer, Estrella Coffee, are deciding on appropriate costing systems for their operations. Stellar Packaging Products’ manufacturing is conducted in batches, and many different applications are used as substrates, or packaging materials, upon which labeling is printed. These include paper, plastic, and metallic films. Estrella Coffee produces different types of coffee, however the roasting and grinding for all types of coffee beans prepared is essentially the same.

Identify the type of costing system that would be appropriate for each of the companies. Include any cost benefit considerations of each system and the effect of technology in adopting a system.

Cost Behavior and Relationships

2-3 paragraphs

Stellar Packaging Products is faced with a decline in demand due to the downsizing of its major customer. Robin Simmons, the company’s controller, is considering a number of changes, which may affect the company’s profitability.

Explain how the Stellar Packaging’s break-even point would change if (1) the selling price per unit decreased, (2) fixed costs increased throughout the entire range of activity, and (3) variable costs per unit increased.