As was mentioned in the Week 4 discussion, Dean Foods Company is a food and beverage organization which mainly focuses on manufacturing dairy products. It is considered as one of the largest dairy firms across the United States. The company is known to produce numerous products both at the national and regional level. Some of the main products of Dean Foods include milk, ice cream, juice, teas, and dairy products. In the United States, milk is processed both under a national and regional brand. They have more than 50 regional and local brands. In addition to fluid milk, the company is also distributing bottled water, refined products, and other essential products.

For the organizational leaders of the company, cost accounting is crucial for measuring and analyzing the cost associated with the products, projects as well as productionto ensure that correct amount are reported on the financial statements of the company. With an appropriate cost accounting, the leaders will be aided in the decision-making process by enabling easy calculation, evaluation and monitoring of the associated costs. Some of the related expenses that the company would incurinclude the following:

Direct cost – this is the costs incurred in the production of their goods and services. The company produces numerous products and services that it distributes to the consumers across the country. A direct cost includeslabor, materials, expense or the distribution costassociated with producing its products. These costs can be easily traced to a product. For example, the company’s employee may spend 2 hours preparing ice cream. The direct costs associated with the ice cream are the wages that the employees are paid and the components used to produce the ice cream.

Indirect cost – this is the costs unrelated to the production of the goods or services. The cost cannot be easily traced to a given product or service, activity, orproject. For Deans Food Company, it is important to note that there is an electricity bill for all the products made in the company. When the bill is paid, no single products can be associated with it.

Fixed cost is another cost that accounting leaders must be aware of. In most cases, fixed costs do not vary with the number of goods or services that Dean Foods produceover a short period. For example, if the Dean Foods leases a machine for production for say, one year, it would be obliged to pay the monthly cost of hiring the machine irrespective of how many products the machine makes. Therefore, the lease payment is regarded as a fixed cost, and it remains unchanged whether the company makes a loss or profit.

Variable costs are the expenses that fluctuate as the level of output production changes. It changes with regard to the number of products that the company produces. As the production volume increases, the variable cost also increases and falls as the production cost also decreases. Dean Foods must package its milk products before distributing them out to various stores. This is regarded as a variable cost because as the company produces more milk products, the cost of packaging also increases. But if the number of products produced decreases, the variable cost associated with packaging also reduces.

There are also operating costs which entail the expenses associated with the every-day business activitiesbut cannot be traced back to one product. It is essential to note that the operating cost can be fixed or variable. Dean Foods have numerous stores across the country; as a result, they are pay rent and utilities. Operating costs are the day-to-day expenses but separately classified from indirect costs. They are the cost associated with the production.

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