ACC 201 Performance Reporting with Process Costing (INDIANA)
Introduction and Alignment
In this discussion forum, you will have the opportunity to understand how process costing affects estimates and performance reports. In a process costing system, costs are accumulated, assigned, allocated, and adjusted. Costs are assigned to the units produced and work-in-process using both objective cost records and subjective estimates of percentage complete. Managers are often rewarded based on how well they meet a production budget.
Upon completion of this assignment, you should be able to:
• Calculate the predetermined overhead allocation rate and allocate overhead costs.
• Textbook: Horngren’s Accounting
• Media: 2.3b Resource: Process Costing
1. In Horngren’s Accounting, review:
a. Chapter 19
b. Chapter 20
2. Review the media: 2.3b Resource: Process Costing.
3. Read the following scenario:
a. The Dutch Girl paint factory uses process costing in their plant to calculate monthly profit and loss for the two production lines producing house paint. Manager bonuses are based on performance compared against goals set by the division’s top management. The cost accountant assigned to produce the monthly cost reports is surprised that each month the work-in-process inventory is estimated to be 80% complete for both lines. She finds it hard to believe that the percentage complete is so consistent from month to month. She asks the production managers to explain their percentage-complete estimates.
4. Navigate to the threaded discussion below and respond to the following:
a. What are some possible reasons for the consistency in the percentage-complete estimates produced by the two production lines?
b. What would be the implications for the performance reports for each of the possible reasons you have identified?
c. Do you believe that the percentage-complete estimates are objective or subjective? Explain.
5. Your initial post is due by the end of the fourth day of the workshop.
6. Read and respond to at least two of your classmates’ postings, as well as to all follow-up instructor questions directed to you, by the end of the workshop.
7. Your postings should also:
a. Be well developed by providing clear answers with evidence of critical thinking.
b. Add greater depth to the discussion by introducing new ideas.
c. Provide clarification to classmates’ questions and provide insight into the discussion.