In process costing, the process is analyzed first, and then a unit measure is computed in the form of equivalent units for direct materials, conversion (direct labor and overhead), and both types of costs combined. The same analysis applies to both manufacturing and service processes.

Required

Visit your local U.S. Postal Service office. Look into the back room, and you will see several ongoing processes. Select one process, such as sorting, and list the costs associated with this process. Your list should include materials, labor, and overhead; be specific. Classify each cost as fixed or variable. At the bottom of your list, outline how overhead should be assigned to your identified process. The following format (with an example) is suggested.

Point: The class can compare and discuss the different processes studied and the answers provided.

		Conversion
Cost Description	Direct Material	Direct Labor	Overhead	Variable Cost	Fixed Cost
Manual sorting
Overhead allocation suggestions: