A research about the production process

and costing system of

in partial fulfilment of the requirements

in Cost accounting and cost management

Submitted to:

MA. DELIA M. LIZ

Professor, ACCO 3046

Submitted by:

BSA 3-1
Group 1
ABERCA, Mary Cris ASIS, Lorraine
ACANTO, Khia AWA, Vergil
ALAMAG, Ryan BACULO, Lealyn
ALCANTARA, Cielo BALTAZAR, Kate Isabelle
APOSTOL, Vernie BANTIAD, Gherrie Mhaye
ARELLANO, Marc Jul SIQUIAN, Samuel Cedric
Del Monte Company
Del Monte Philippines operates the largest integrated pineapple operation in
the world. The company grows pineapple across 20,000 hectares in Bukidnon and
Misamis Oriental. Two distinct pineapple varieties are grown, for processing and for
fresh fruit export.

Some 700,000 tons of pineapple and papaya are processed each year at its
manufacturing plant. This accounts for about a tenth of the world's annual
production of processed pineapple products. On this 23-hectare manufacturing
complex are fruit receiving stations (the world's largest), fruit processing plants
(single and multi-fruit products), juice plants (single-strength and blended products),
can manufacturing plants, labeling and packaging lines (carton, plastic cup, glass
jar, stand-up pouch), warehouses, container yards and a deep-dredged international
seaport.

Around 4,000 regular employees work with Del Monte to bring high-quality
products to customers around the globe. Over 90 percent of these employees work
in Mindanao. Key teams managing sales, marketing, finance, logistics, product
development and other support operations are based in Metro Manila.

Process Costing in Del Monte Pineapple Production

Process costing is used when there is mass production of similar products,

where the costs associated with individual units of output cannot be differentiated
from each other. Process costing can be applied in Del Monte since it has mainly one
product which is pineapple and the costs associated with the individual outputs are
the same. It has also different departments where the pineapples are processed to
become finished product to be sold in the market. These departments are based on
the following production processes.

 Sorting
After harvesting, the fruits are sorted, because only those that are fresh, ripe
and not rotten can be used to make jams. Jams can also be made from previously
prepared, frozen fruits and pulp

 Washing
The fruit should be washed very carefully as it can easily be damaged.

 Peeling and sorting

This follows the procedure of removing leaves, wooden pieces, pips or seeds and
peel. Peeling is often done manually, or with knives, yet sometimes the skin is
loosened with steam and then subsequently rubbed away mechanically. Finally, the
fruits are sorted again to remove any blackened pieces, bits of peeling, seeds etc.

 Pulping
 The peeled fruit can be cut into a variety of shapes, according to type (indicated
by the crosses in the table). The shape of the cut fruit must be given on the can
(slices, diced, pieces etc.). The peeled fruits are then pulped, and sugar added. They
might also be mixed with water or fruit juice.

 Filling in jars or cans

The cut pieces are now filled into jars or cans and covered with syrup.

 Vacuum sealing, pasteurising or sterilizing

After the jars or cans have been vacuum sealed, they are either pasteurised
(temperatures above 80°C) or sterilised (temperatures above 100°C).

 Cooling
After the heating process, the canned fruits are first cooled to 40°C, and then
subsequently down to storage temperature

 Labelling, Packaging and Storage

After they have been cooled, the canned fruits are labelled and stored. In order
to be exported the slices/pulp/juices can be packed into single or wholesale
packages (bulk) consisting of glass jars, tin cans or polyethylene or polypropylene
bags, and also filled antiseptically into ‘bag-in-boxes’.

Allocation of Joint Costs and Accounting for By-

Product/Scrap

The accumulation of costs commences at the time pineapples are planted in

the farm. This is also the point where the accumulation of joint costs starts up to the
point that there are identifiable products. The costs of the products include direct
material, which is the pineapple itself; direct labor and factory overhead which is
assumed to be greater than the direct labor cost since the production is machine
intensive.
The main products of Del Monte are pineapple slices, pineapple wedges,
pineapple chunks, pineapple tidbits, crushed pineapple, and pineapple juice. At the
split-off point, pineapple extracts need to be processed further to become pineapple
juice. Further processing costs include cost of additional ingredients like sugar
syrup; cost of sterilization and pasteurization; and cost of sealing, labelling and
packaging.
There are two types of waste generated from the production – pineapple
peelings and pineapple pulps. Pineapple peelings are used as fertilizers, which are
mixed into the soil in the company’s own plantation while the pineapple pulps are
used as cattle feeds for their own farm.