Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 59

Assessing the Need for Process Costing
Potter Corporation mass-produces pencils through several processing departments 10 hours per day, 300 days per year. The company currently uses a process costing system and traces manufacturing costs from one process department to the next. The company produces over 30 million pencils per year. The number of pencils in production at any single point in time never exceeds 50,000.
Jim Dank has just been hired as the company's cost accountant. Given the company's annual output relative to production activity at any single point in time, Dank suspects that the cost of maintaining a process costing system outweighs the benefit. Therefore, Dank recommends that the company's current work in process inventory accounts be eliminated, and that all manufacturing costs be charged directly to the Finished Goods Inventory account.
Defend Dank's recommendation.