Case Study: Process Cost Accounting at CleanWave Detergents Ltd$.$

Background:

CleanWave Detergents Ltd$.$ is a manufacturer of liquid detergents. The company operates on a continuous production basis using process costing to account for costs in its production departments. CleanWave has three main departments: Mixing, Bottling, and Packaging.

The company uses a weighted average method for its process costing and tracks direct materials, direct labor, and overheads separately. For the period under consideration, the following data are provided for the Mixing Department:

$$ Beginning work in progress $($WIP$)$: $10,000$ liters, $80\%$ complete for materials, $50\%$ complete for conversion costs $($labor and overheads$).$

$$ During the month, $100,000$ liters were started into production.

$$ Ending WIP: $5,000$ liters, $60\%$ complete for materials, $40\%$ complete for conversion costs.

$$ Total costs in the beginning WIP: Direct materials $-$ $$5,000$; Conversion costs $-$ $$7,000.$

$$ Costs added during the period: Direct materials $-$ $$50,000$; Conversion costs $-$ $$36,000.$

$1.$ Define process costing and explain how it differs from job$-$order costing.