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Name and Nature of Organization
McDonald’s corporation is a world leading chain of hamburger fast food restaurant with a presence on 119 countries. The company started as a barbecue restaurant that was operated by two brothers Maurice and Richard McDonald in 1940. Ray Kroc who had joined the company as a franchisee in 1955 later purchased the brand in 1961 and facilitated the opening of many branches across the globe so as to attain a worldwide reach (Lechner, 2009).
He adopted the principles of quality, service, cleanliness, and value. Rosaldo & Inda (2008) studied that Kroc was of the opinion that a customer should have gotten a full refund of his/her money should the customer have not been satisfied with the quality of service and the product itself. In addition, he set the standard of quality of the McDonald’s products be insisting on cleanliness at all times. Kroc was quoted as saying that if a steward could have time to stand, he could also have the time to push a broom and make places clean. This set the standard for cleanliness and quality that is still enjoyed at the McDonald has to date.
The restaurants deal in hamburgers, chicken, French fries and cheese burgers among others depending on the location of the restaurant (Smart, 1999). It also deals in shakes, soft drinks and desserts. Most of the restaurant products have the prefix Mc so that the chicken is called the McChicken thereby making the brands known. The company further states that ‘we are committed to continuously improving our operations and enhancing our customers’ experience’ (McDonald’s, 2011). The values of the company include concern about customer experience, commitment to the customers, ethical practice, giving back to the community, striving to improve, and growing business profitably.
Activity and Time Period
The time period that I have used is January 2010 to December 2010. This time period was chosen because of the nature of the paper that requires the assessment for a prior decision or a future decision. Due to the lack of information about both prior and future operational decisions of McDonald’s corporation pertaining to operations, I have chosen to look at a future decision. This will not only create an ease in the calculations but also allow me to demonstrate by understanding in a more appropriate manner.
Data
It is imperative that the senior management and the board of directors of the McDonald’s corporation should have detailed understanding of the costs structures at every level of the organization. The value chain of the company begins from research and development through to customer service. Research and development involves finding out what business opportunities are feasible in the rice market and how it can be developed in a way that suits the consumers who are the primary concern of a company during production.
The production/manufacturing stage on the other hand ensures that the product that is made is cost effective, appropriate for the target group safe for consumption over a long period of time. Sales and marketing ensures sustainability of a product in the market while also providing information on the leeways that exist of the expansion of business.
Consequently, various overhead costs will be allocated using departmental method. This is owed to the fact that departmental method of overhead allocation allows various departmental service costs to other service and operational departments in a sequence. Through such sequence, systematic allocation would be attained since it flows from the highest ranked department down to other departments that do not offer much service.
The allocation of overhead costs will be guided by the objectives that each cost is to accomplish. As such, costs such as Finance, freight, depreciation, marketing/advertisement and artwork will be allocated in every department using number of units on an item-by-item basis. Since there is overhead cost in both Company-operated restaurants and franchised restaurants, the cost of production will be allocated in these two departments to take care of the freight, depreciation, marketing/advertisement, and artwork in each department.
Results
Ideally, the overhead cost allocation for the Company-operated restaurants and franchised restaurants will be channeled as per the table below.
The process-costing summary for the year Company-operated restaurants and franchised restaurants are shown in the table below:
Implications
The McDonald faces competition from other players in the fast food companies market (McDonald’s corporation, 2011). In order to maximize profits, the company must be sure to cut on costs by taking up on the appropriate costing system and forming a niche in the already competitive market.
References
Lechner, F. (2009). Globalization: The making of world society. Malden, MA: Wiley-Blackwell.
McDonald’s corporation. (2011). 2010-annual-report. Web.
Rosaldo, R. & Inda, X. J. (2008). The anthropology of globalization: A reader. Malden, MA: Blackwell.
Smart, B. (1999). Resisting McDonaldization. London: Sage.
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