dream chocolate company Essay

2351 Words Oct 20th, 2014 10 Pages
Dream Chocolate Company: Choosing a Costing System
Analysis of D.C.’s Competitive Environment and Information Need
Dream Chocolate (D.C.) is a small company trying to survive in an industry with many competitors. The competitive environment comes from some factors. Firstly, D.C. bars are sold in specialty markets, fine gift stores and also available online. However, the competitive companies can also provide various chocolate bars for customers with the low price on the Internet. Secondly, comparing to the big chocolate company like Mars, D.C. is a small company that has the lower brand reputation. Therefore, there may be not many people would trust their products. On the other hand, facing this competitive environment, D.C. has
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Process Costing System
Process costing typically used by companies that produce large quantities of identical products that are made in long, continuous production runs through a series of process centers (departments). Process costing accumulates costs in a department for an accounting period and then spreads them evenly, or on an average basis, over all units produced that month.
Process costing is an easier system to use when costing homogenous products compared to other cost allocation methods. Each process applies direct materials, labor and manufacturing overhead to the production cost total. Management accountants take the total number of goods leaving the process and divide the total process cost by this number. This creates a simple average cost for each item produced. Another advantage is that business owners use process costing because it creates a flexible production process. Companies needing to refine their process can simply add or remove a process as necessary. This also allows companies to lower their production cost for each good. Adding a process allows companies to produce slightly different goods or improve product quality. This flexibility ensures companies can produce at the most competitive cost in the economic marketplace. Also process costing provides an approach to allocate costs to
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