BIG Manufacturing Products Has Been Using FIFO Process Costing for Tracking

question 59

Essay

BIG Manufacturing Products has been using FIFO process costing for tracking the costs of its manufacturing activities. However, in recent months, the system has become somewhat bogged down with details. It seems that, when the company purchased Brown Electronics last year, its product lines increased six-fold. This has caused both the accountants and the suppliers of the information, the line managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of the completion of ending work-in-process inventories and the associated costs has become very cumbersome. The chief financial officer of the company is looking for ways to improve the reporting system of product costs.
Required:
What can you recommend to improve the situation?

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Definitions:

Flexibility and Creativity

Flexibility and creativity are qualities that allow individuals or organizations to adapt to change and generate innovative solutions to problems.

Hierarchical Division

The breaking down of an organizational structure into levels of hierarchy, where tasks and responsibilities are clearly delineated by rank.

Formal Authority

Formal authority is the official power granted to an individual or entity within an organization to make decisions, direct others, and enforce obedience based on their position or role.

Vertical Specialization

The structuring of an organization’s workforce based on hierarchical levels of authority and specialized functions or tasks.