ShineBright is a chemical production company that specializes in the creation, bottling, and distribution of liquid bleach. ShineBright has continued to experience growth over the past few years and has decided to ask their controller, Shawn, to evaluate their current costing position. Management would like to determine whether switching to Process Costing in a previous year was the correct choice. The company understands that continuing to use this method requires a lot of deliberate planning to ensure that inventory is appropriately valued in its various stages of completion. Shawn has gathered the following data for the current year:
Shawn has been employed with ShineBright for a few years and believes that Process Costing is the correct choice for the company. The company produced 297,400 bottles of liquid bleach this year and anticipates a 10% increase for next year. Taking into consideration all of this information, please answer the following questions:
a. What is the unit cost of the liquid bleach during the current year?
b. Assuming that ShineBright sees a 10% increase in sales for the following year and a corresponding 12% increase in Direct Materials and a 15% increase in Direct Labor, how will this impact the unit cost? Use the beginning and ending WIP inventory from the current year.
c. Is Process Costing the best option for ShineBright as Shawn predicts? How does this method compare to a method such as Job Order Costing?

Question

ShineBright is a chemical production company that specializes in the creation, bottling, and distribution of liquid bleach. ShineBright has continued to experience growth over the past few years and has decided to ask their controller, Shawn, to evaluate their current costing position. Management would like to determine whether switching to Process Costing in a previous year was the correct choice. The company understands that continuing to use this method requires a lot of deliberate planning to ensure that inventory is appropriately valued in its various stages of completion. Shawn has gathered the following data for the current year:
  Shawn has been employed with ShineBright for a few years and believes that Process Costing is the correct choice for the company. The company produced 297,400 bottles of liquid bleach this year and anticipates a 10% increase for next year. Taking into consideration all of this information, please answer the following questions:
a. What is the unit cost of the liquid bleach during the current year?
b. Assuming that ShineBright sees a 10% increase in sales for the following year and a corresponding 12% increase in Direct Materials and a 15% increase in Direct Labor, how will this impact the unit cost? Use the beginning and ending WIP inventory from the current year.
c. Is Process Costing the best option for ShineBright as Shawn predicts? How does this method compare to a method such as Job Order Costing?

Quizplus · Accepted Answer

The Answer of ShineBright is a chemical production company that specializes in the creation, bottling, and distribution of liquid bleach. ShineBright has continued to experience growth over the past few years and has decided to ask their controller, Shawn, to evaluate their current costing position. Management would like to determine whether switching to Process Costing in a previous year was the correct choice. The company understands that continuing to use this method requires a lot of deliberate planning to ensure that inventory is appropriately valued in its various stages of completion. Shawn has gathered the following data for the current year:
  Shawn has been employed with ShineBright for a few years and believes that Process Costing is the correct choice for the company. The company produced 297,400 bottles of liquid bleach this year and anticipates a 10% increase for next year. Taking into consideration all of this information, please answer the following questions:
a. What is the unit cost of the liquid bleach during the current year?
b. Assuming that ShineBright sees a 10% increase in sales for the following year and a corresponding 12% increase in Direct Materials and a 15% increase in Direct Labor, how will this impact the unit cost? Use the beginning and ending WIP inventory from the current year.
c. Is Process Costing the best option for ShineBright as Shawn predicts? How does this method compare to a method such as Job Order Costing?

ShineBright Is a Chemical Production Company That Specializes in the Creation