During week 4 you were asked to find a publicly traded manufacturing company. For our week six discussion board post I would like you to select the same company. Go to their website and read about the

COCA COLA PROCESS COSTING 1

Coca Cola Process Costing

Organizations are always required to keep track of their costs; this is the only way through which their executives and managers can be able to make effective decisions that benefit the company stakeholders. These efforts have to be taken in their day-to-day operations, and to do this; companies rely on cost accounting systems that allow them to allocate costs effectively in their production of goods and services (Horngren, 2015). One such method that helps companies to allocate their costs effectively is process costing. This method is preferably used by manufacturing companies, especially the ones that produce several identical products such as Coca Cola.

Indeed, Coca Cola is a publicly-traded manufacturing company whose stocks are traded on the New York Stock Exchange. The company is considered to be a leading manufacturer of soft drinks, soft drink concentrates and syrups, and also regarded as a leading marketer. The company is considered to be a world leader in the production of nonalcoholic beverages (Coca Cola Company, 2020). The production of the nonalcoholic begins by the process through which direct materials, which include water and refined sugar together with other undefined ingredients, are mixed. After which the liquid is then taken to a filling process, where they are filled in cleaned and sanitized bottles and caped. This process is then followed by the inspection, labeling, and packaging of the bottled sodas. In essence, the manufacturing of its product, the soda, entails the process of mixing and blending, followed by the bottling of the soda, and ends with inspection, labeling, and packaging. Only after the soda has gone through all this process is when they get shipped to warehouses. The company conducts costing at every stage in the process. Then when they are move to the warehouse, the costs are entered into finished inventory and later cost of goods sold when delivered to the various retailers.

Consequently, the company has to allocate its costs efficiently, and this is ensured through a process costing method. This is because the company's way of operation entails there significant processes, and therefore, with the use of process costing techniques, the company duly tracks product costs and customer costs. The costs are incurred in regards to direct materials, labor, and overheads utilized in the three distinct processes (Jiambalvo, 2019). The allocated costs are entered concerning the mixing process entailing the manufacture of the concentrate and syrup, the blending process, and packaging (Coca Cola Company, 2020). Therefore, process costing is a viable cost allocation method because it accumulates costs according to processes involved, and further allocates them to several identical products (Jiambalvo, 2019). Because Coca Cola manufactures similar products, it thus relies on process costing, as it is a method that works well in a standardized production process where homogeneous products are made.

In consideration of the fact that a Coca Cola plant is systematically designed to operate under three processes, that is, mixing, bottling, and packaging (Coca Cola Company, 2020). It is, therefore, logical to conclude that the company utilizes process costing as its preferred cost accounting system. It is this regards it is clear that the company employs process costing because it is the only viable method that enables the company to trace costs to a single process instead of individual products. It is only after tracing costs to a single process that the company is then able to move the costs and allocate them to all its products (Langfield-Smith, 2017). The choice of process costing as the cost accounting system used by Coca Cola was informed by the realization of the fact that the company managers have to make important production decisions. Therefore, in line with the production outlay process system was most viable in regards to its capacity to offer the information required for the analysis of products, process improvements, and profitability. The viability of process costing is informed by the fact that it best fits a company like Coca Cola because it produces identical units in batches, and in doing so, the company products are produced through a consistent process (Horngren, 2015). Within the company outlay and way of operation, process costing is a viable cost accounting system because it is an approach that allows the determination of the required unit costs that can be used to value the company's inventory and costs of goods sold.

References

Horngren, C. T., Datar, S. M., & Rajan, M. V. (2015). Cost accounting: A managerial emphasis.

Jiambalvo, J. (2019). Managerial accounting. John Wiley & Sons.

Langfield-Smith, K., Smith, D., Andon, P., Hilton, R., & Thorne, H. (2017). Management accounting: Information for creating and managing value. McGraw-Hill Education Australia.

The Coca Cola Company (KO) (2020). Company Description. Market Watch, Inc. Retrieved from https://www.marketwatch.com/investing/stock/ko/profile