Would Wilson Sporting Goods Use Job Costing Or Process Costi

Would Wilson Sporting Goods Use Job Costing Or Process Costing For Its

Would Wilson Sporting Goods use job costing or process costing for its footballs? Footballs for the National Football League (NFL) are produced by Wilson Sporting Goods at a factory in Ada, Ohio. The factory produces approximately 700,000 footballs annually for NFL games, including the Super Bowl. The manufacturing process has remained consistent since the 1950s, utilizing equipment from that era. The process involves stitching pieces of leather inside out, steaming and turning the football right-side out, inserting the bladder, lacing, shaping through molding, and finally inspecting each football for quality. Given the repetitive nature of these steps and the uniformity of the footballs, an initial assessment suggests that Wilson likely employs process costing for manufacturing its NFL footballs.

Process costing is appropriate when products are identical or very similar and are produced continuously or in large batches, which aligns with Wilson's production of NFL footballs. In this case, each football undergoes the same series of operations, and the costs are accumulated for processes over a period, then averaged over the total units produced. The use of outdated equipment and consistent procedures across all footballs further strengthens the case for process costing, as this method simplifies the accumulation and allocation of costs in a high-volume production environment where customization is minimal.

Would the Ada Wilson factory be likely to use job costing or process costing when accounting for the cost of manufacturing its NFL footballs? Explain.

The Ada Wilson factory would most likely use process costing for its NFL football production. The key reasons supporting this choice include the nature of the manufacturing process and the volume of output. Since all NFL footballs are manufactured in a highly standardized process, with each football passing through identical stages of production, process costing provides a straightforward and efficient way to accumulate costs. This method averages costs across all units produced during a period, thereby simplifying accounting and cost control processes. Additionally, the use of older, consistent equipment and procedures minimizes the need for tracking individual costs associated with specific units or batches, which would be necessary under job costing.

Job costing is typically employed when products are customized or produced in small batches—conditions that do not align with Wilson’s mass production of NFL footballs. If Wilson were to manufacture customized footballs with individually specified features, then job costing or a hybrid of both costing methods could be considered. However, under the current scenario where uniformity and high volume predominate, process costing remains the logical choice, enabling Wilson to accurately allocate costs and achieve economies of scale.

Now imagine that the Wilson footballs from the Wilson Ada factory come in a variety of sizes (for souvenirs, for peewee football games, and other uses.) In addition to varying sizes, the quality of the leather (impacting durability) can be customized for each order. Would the Ada Wilson be likely to use job costing or process costing for manufacturing footballs under these assumptions? Explain.

If Wilson’s production shifts toward offering a variety of sizes and customizable leather quality for different orders, the company would need to modify its costing approach. In this scenario, the manufacturing process becomes more complex and less uniform, as each order could have unique specifications. This would increase the difficulty of averaging costs across units because costs would vary significantly depending on size, leather quality, and other custom features. Under these circumstances, Wilson would be more inclined to adopt job costing for each distinct order or batch.

Job costing allows for precise tracking of costs associated with individual jobs, making it suitable when products have specific customizations or are produced in smaller quantities. For example, a custom-sized football with premium leather for a special event would have separate direct material and labor costs that need to be accurately assigned to that specific product. Using job costing ensures that Wilson can determine the true cost of each customized football, facilitate accurate pricing, and maintain profitability.

While process costing would be less appropriate here due to the heterogeneity of the products, Wilson might consider a hybrid approach—applying process costing to the bulk of standardized footballs and job costing for the customized orders. This flexibility allows Wilson to efficiently account for costs, meet customer-specific requirements, and maintain cost control.

Conclusion

In summary, Wilson Sporting Goods likely employs process costing in its standard production of NFL footballs due to the uniformity and high volume of the manufacturing process. However, if the company introduces more product variety, including different sizes and customizable leather quality, it would shift towards using job costing to properly allocate costs and accommodate product differentiation. This strategic change in costing methods aligns with manufacturing best practices, addresses the need for accurate cost tracking, and supports operational flexibility in offering a broader product array.

References

• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2021). Managerial Accounting (16th ed.). McGraw-Hill Education.
• Atkinson, A. A., Kaplan, R. S., Anderson, S. R., & Matsumura, E. M. (2012). Managed by Practice: Analytics for Decision Making (2nd ed.). Pearson.