Johnson Associates is a catering firm in Tucson, Arizona, with revenue of $4 million. The business began ten years ago as a one-owner bakery, but has dramatically changed in size and function during the past five years. The four partners foresee the business doubling in sales revenue within two years, and expect the firm to expand into other services including flowers, furnishings, decorations, and music. Johnson Associates employs six full-time and ten part-time employees. The four partners also work full-time, each partner managing a separate business function. The firm currently uses a volume-based costing system installed seven years ago and modified three years later.
Required:
(1) With just the above information, comment on Johnson Associates changing and future costing system needs.
(2) Is Johnson Associates a probable candidate for an activity-based costing system (ABC)? Why or why not?

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The Answer of Johnson Associates is a catering firm in Tucson, Arizona, with revenue of $4 million. The business began ten years ago as a one-owner bakery, but has dramatically changed in size and function during the past five years. The four partners foresee the business doubling in sales revenue within two years, and expect the firm to expand into other services including flowers, furnishings, decorations, and music. Johnson Associates employs six full-time and ten part-time employees. The four partners also work full-time, each partner managing a separate business function. The firm currently uses a volume-based costing system installed seven years ago and modified three years later.
Required:
(1) With just the above information, comment on Johnson Associates changing and future costing system needs.
(2) Is Johnson Associates a probable candidate for an activity-based costing system (ABC)? Why or why not?

Johnson Associates Is a Catering Firm in Tucson, Arizona, with Revenue