2.

What relevant managerial accounting information are needed (or needed to be determined) to
evaluate the potato chips production and allow better decision making?
One of the relevant managerial accounting information apparent in this case is the use of
the process costing system. Process costing is a costing method wherein the products go
through two or more production processes. The costs are assigned to each process or
operation, which is averaged over the number of units produced during that period. Process
costing is commonly used in industries that convert raw materials into standardized
homogenous products – products that cannot be distinguished from others, just like this potato
chip factory. The raw material, potato, has to go through three different processing departments:
the potato preparation, cooking and inspecting, and packaging department.
Generally, companies utilize process costing when there’s mass production of identical
products, the output of products is of low value, or tracking the cost to an individual product is
not feasible. Because of these factors, management tracks costs by each department or
process. Each department has its budget to track the costs as the product moves through
different processes or departments.
Process costing is straightforward in tracking the unit cost. Managers divide costs by the
number of units to total an average production cost. For instance, the potato chip factory
management can identify the cost per unit in the potato preparation by dividing the total cost
accounted for the total equivalent units in that process. Similarly, the cost per unit in other
production processes can also be identified. Getting accurate per-unit costing helps with pricing
products appropriately, leading to increased revenue. They can also use process costing to
analyze the costs of each production and distribution process and use this information to identify
processes to reduce costs.
Indeed, process costing helps management in decision making. It allows greater
flexibility when making changes in the production process. Companies like potato chip factories
can use this method to identify relevant costs for each production process, and no irregular
expenses are used in any process.