Below are your two Process Costing question prompts. Remember that you must answer each question, and reply to a classmates response to receive full credit. To encourage you to start, only one student may use a given production process (such as an ice cream factory). So if you’re intended choice is taken, you have to think of a new production process.
1. What is an example of a production process that would use production costing? Please explain the costs you think are involved and the various departments the product will go through. You don’t have to do a deep dive though you’re more than welcome to, but I do expect you to put in some analysis.
For example, a massive bulk ice cream manufacturer would use process costing. Their production costs would be direct materials such as milk, cream, sugar, and eggs. Direct labor would be very minimal. Factory overhead would be the extensive part of the conversion costs and would include rent or depreciation on the production facility, utilities such as electricity, and depreciation on the factory equipment. Milk and cream would be the most expensive direct material. Sugar is expensive, but we can get by using corn syrup, which is much cheaper. Our factory overhead will also incur more costs than expected, because we will mix/whip a lot of air into the ice cream so we can put less actual ice cream into the container. This will incur more electricity costs because we have to run the mixing machine faster and for a longer period of time, but we’ll more than make up for the cost because we’ll our container will be 1/2 ice cream and 1/2 air. The major departments would be the mixing department, the freezing department, and the packaging department.
2. Is fruit salad really a salad?
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