Part A

Process Costing:

Process costing is a method of costing used in industries where the material has to pass through many processes for being converted into a Finished product.A separate account for each process is opened and all expenses related to a process is recorded to that process account.

a) Features of Process Costing:

• Each plant or factory is divided into anumber of processes, cost centres or department and each such division is a stage of production or a process.
• Manufacturing activity is carried on continuously by means of one or more process run sequentially, selectively or simultaneously.
• The output of one process of manufacturing is the input of another process.
• The end product usually is of like units not distinguishable from one another.
• It is not possible to trace the identity of any particular lot of output to any lot of input material.

b) Two Australian Companies:

1. Chevron Corporation (Petroleum products)

2. Wrigley Company ( Chewing Gum)

Process costing is used when there is a large production of similar products where the cost is associated with individual units of output which cannot be differentiated from each other. Process costing is the only reasonable approach to determining the costs of the products in several production industries.

c) Potential Uses of cost information in Decision making

• Statement of Equivalent production Units
• Statement of Equivalent cost per unit
• Statement of cost Approach
• Process Account

Mainly two methods are used

• FIFO method
• WAV method

Manager Used this method is process costing to disclose the costing department and a correct costing is each department are recorded in the books.

Part B

Choose one peer reviewed journal article (from any country) on the:Use of process costing system in a real-life organisation (i.e. a case-based empirical study). The article should be published between 1990 - 2020.

Questions:

1. Based on your chosen costing article, briefly summarise how the costing system was designed and implemented in your real-life organisation. (3 marks)

2. Based on your chosen costing article, did the costing system in the study satisfy the features discussed in Part A (Q1)? Why or why not? Include examples in your answer from your costing article. (5 marks)

3. Based on your chosen costing article, how useful was the cost information to the internal users in the organisation? Discuss with examples from your costing article. (5 marks)

4. Based on your literature findings, state two key lessons that would inform contemporary organisations about the practical use of your chosen costing system. (5 marks)

Additional Information:

a) You are encouraged to choose the journal article from the following Accounting and Management Accounting Journals:

Accounting, Auditing and Accountability Journal;

Journal of Management Accounting Research

Journal of Applied Management Accounting Research