Hey there, I received a question from my tutor regarding the discussion that I posted. Please see attached discussion you sent me earlier:
Q1- excellent points raised regarding the industries that are best suited for process cost systems. The Vercio (2018) reference really helps support the overall analysis. Within the paper industry, and your example, what might the findings of process cost system implementation uncoverto help the paper company?
please read the attached discussion, andmake reply to this question.
Hey there, I received a question from my tutor regarding the discussion that I posted.
Please see below the discussion you sent me earlier:
Q1- excellent points raised regarding the industries that are best suited for process cost
systems. The Vercio (2018) reference really helps support the overall analysis. Within the
paper industry, and your example, what might the findings of process cost system
implementation uncover to help the paper company?
please read the attached discussion, and make reply to this question.
Please separate the answer on a separate file.
Word limit: 80 to 100. Please do not exceed the limit
Important:
Please note that it is important to include sufficient references in the work and ensure zero
plagiarism.
Cost Systems discussion
What type of industries are best suited for process cost systems?
Process cost systems are best suited for the industries involved in the continuous
manufacture or production processes, thus producing standardized and homogenous products.
Based on continuous production, these industries produce products in large quantities for a prolonged
time with no changes (Vercio, 2018). Standardized products in the industry involve the
standardization of the manufacturing process; thus, every output unit undergoes the same
manufacturing stage. On the other hand, homogenous products imply identical products, allowing the
averaging of prices over a large output. The type of industries suited based on the process cost
systems have mass production, meaning that the industry produces significant large-scale products
and utilizes uniform price accumulations.
In real-life examples, the industries that are suited to the process cost systems include
chemical manufacturing industries that major in the production of a chemical in large amounts, such
as pharmaceutical industries. Paper manufacturing industries are other types of industries that are
suited to the process cost system with the production of papers. Textile manufacturing, oil refineries,
and electronic and automobile industries are other examples that are suited to the process cost
systems due to the features of mass production, homogenous products, standardized products, and
continuous production through their process.
Discuss how the process cost system is tracked and recorded for one of the following types of
business: (a) TV assembler, (b) building contractor, (c) automobile repair shop, (d) paper
manufacturer, (e) custom jewelry manufacturer.
The paper manufacturing industry is one of the industries that is fit for the continuous
production of papers as homogenous and standardized products through the production process. In
the paper manufacturing industry, the primary process of production is majored in the process of
stages from the first to the last. The process involves pulping, refinery, papermaking, and finishing
with the production of papers. The production process involves direct materials, labor, and production
overheads.
The process cost system is tracked and recorded in different steps through the production
process. The process cost system is followed in the cost accumulation in which cost is accumulated
on every process, including direct materials, labor, and production overheads. The WIP inventory
helps calculate the value of progressive work that is incurred in every stage with the costs that are
incurred (Schwartz, 2019). Additionally, the process cost system is tracked and recorded based on
the cost allocation, which is allocated to produced units per process and done through a
predetermined or actual overhead rate. The production report cost is the other track and record of the
process cost system in which the different costs that happen in the production process are
summarized.
In the business type you selected, what is the most important purpose of the cost of
production report, and how can it improve operations in that business type?
The main purpose of the summary or report for the production cost is that it helps to evaluate
the effectiveness of each production process based on cost. The organizational manager will be able
to recognize particular areas through the production process that incurred higher costs and take
action on them effectively. Additionally, the report is used in evaluating the significant performance of
each production process and department, which is used in making particular targets and goals.
The report is used to improve industrial operations by enhancing the effective allocation of
essential resources that offer the business insight into different processes that need more resources
(Warren & Tayler, 2020). Additionally, the report helps the business to understand the structure of
cost that will help the business in setting effective pricing strategies and plans for their profitability.
REFERENCES.
Schwartz, J. (2019). Solid information helps address controllable costs. Chapter 3: Managerial
Accounting. World Oil, 240(1), 25.
Vercio, A. (2018). Process costing: The most important subject in the management accountant’s
curriculum. Journal of Corporate Accounting & Finance (Wiley), 29(2), 141–
150.
https://doi.org/10.1002/jcaf.22334.
Warren C.S & Tayler W.B (2020). Managerial Accounting, 15th Edition. Chapter 3: Process Cost
Systems.
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