Potato Chip: Basics of Cost & Managerial Accounting Report (Assessment)

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Introduction

Each product on the market can be created using a variety of manufacturing processes. Different foods, for instance, may belong to one class of goods but have a special recipe or contents that separates them from the competitors. Potato chips, the selected product for the assessment, are not an exception. Although chips are generally made from potatoes, fried in oil, and seasoned, their ingredients, shape, packaging, and taste different according to the company. Nonetheless, one can examine the manufacturing process for potato chips and see which key actions, resources, and costs are required for this business.

Product

To begin the investigation, it is crucial to specify which goods are considered in the assessment. Potato chips are fried snacks made from potatoes, presenting in the shape of thin slices either in a bag or a tube container (Ugonna et al. 291). Recently, some manufacturers began searching for new ways to make chips with less fat, creating baked alternatives. However, this assessment will discuss the traditional fried variety of potato chips. One can separate all potato chips into two major categories – fried potato slices and cooked rehydrated potato paste. Other forms can only bear the name of potato snacks and are not reviewed.

The difference between these two types of chips lies in the manufacturing process, and businesses have to select which goods they want to produce, as the steps for these products vary significantly. The next chapter will examine both sequences to present that, although both snack varieties have the same name, their manufacturing processes are unique.

Manufacturing Process

First, one can show how chips made from potato slices are manufactured. The process starts with the examination of the main ingredient – potatoes that arrive at the plant. Testers select several vegetables from the shipment and check them for color, quality, and blemishes. If the number of defects is higher than the company allows, the whole load is rejected (“Potato Chip”). After the potatoes are accepted, they are transferred to the conveyor belt, which moves them through all other activities. Potatoes are washed and peeled using a particular machine that usually rubs the potato skins off the vegetables (“Potato Chip”).

Then, potatoes are sliced – they can be cut with a straight or a rippled blade to produce regular and ridged chips, respectively. After that, the thin vegetable slices can be rewashed, as cold water removes the starch that is released by potatoes. This step was added by manufacturers to improve the color of potatoes. To improve the final look and taste of the products further, some companies treat the slices with chemicals before frying, dipping them into a specific solution.

Cut and washed, potato slices are dried from excess water and solution in a dewatering machine. They enter troughs filled with hot oil, being moved along with automatic paddles. Then, they return to a conveyor belt, cool off, and lose excess oil. At this stage, the chips are sprinkled with salt and seasoned, depending on the established flavor. Moreover, a machine or a person examines the chips and throws away any burnt slices (“Potato Chip”).

Finally, the chips enter the packaging stage – the computer weighs the chips using pre-set instructions and directs the machines to fill a formed bag. The packaging is then filled with air and sealed using heat. Notably, there are also several steps to creating packaging for chips. First, the bags or other containers are designed, and materials are selected. The manufacturer can purchase prepared rolls of plastic from other companies or make them in a separate facility. During the chips’ packaging step, the rolls of plastic are uncoiled and put into the machine that seals and cuts individual bags.

Second, the process for chips made from dehydrate potatoes has to be examined. Here, the manufacturer receives not vegetables, but dried potato flakes and corn starch. These two materials are mixed with water and moved to an auger, which makes the paste homogenous (“How Potato Chips Are Made”). Then, the single sheet of dough is formed using press rolls. Oval shapes are cut from the film and separated from the remaining mix, which is transferred back to mixing. The oval slices move to the fryer, where they also gain a distinctive shape for stacking. After being cooked, the chips travel through a blower that dries them off from excess oil (“How Potato Chips Are Made”).

During the following step, the chips are seasoned and flipped to form stacks. A person checks the slices to see whether they are well-cooked and uniform and throws away any chip that does not fit the standards. Finally, the chips are placed into tubes and sealed, and containers are transferred further to be shipped.

In this case, the steps for making packages are also more complex. The tubes are formed from several layers of plastic, foil, and paper, which are glued and pressed together, cut and sealed with paper and plastic lids (“How Potato Chips Are Made”). In the end, the filled tubes are sealed from the other side with a metal circle pressed into the bottom of the package. The higher number of resources used also requires more steps for their assembly.

Resources

In the first scenario, the central component is potatoes- they have to be of a particular size, color, type, and quality. Other resources are water, oil, chemical solution, salt, and other ingredients for flavoring. Apart from that, materials for packaging are needed, considering both individual bags and boxes for shipping and storage. In the second case, potato flakes, cornstarch, water, oil, flavoring, water as well as paper, foil, and plastic details for packaging are required. These materials are directly related to the production of potato chips.

Other resources are employees, machines, electricity, hardware, software, and data necessary to maintain the operation of the manufacturing facility. Here, the amount of resources and their selection depends on the size of the organization and its computerization. Some companies can employ a small number of people to oversee the machines that produce chips using computers. Here, a significant resource would be the machines and their programs that need to be serviced, checked, and maintained. Other businesses can have semi-automatic plants where people are engaged in operating the machines (Pradhan et al. 1665).

In this case, the knowledge of the workers can be separated as a valuable resource. In both cases, human testers and quality checkers are a part of the process since they determine whether the final product is ready to be shipped.

Cost

The expenses for producing potato chips are linked to the materials needed for manufacturing. Direct costs include raw materials – potatoes, water, oil, seasoning, packaging, and others. The cost of equipment and software that is purchased to run the plant are also direct costs. Labor specific to the manufacturing process is in this category as well – quality checkers and machine operators’ salary has to be included.

The training of employees may be added to costs as well, especially if it happens on the territory of the company or is paid by the firm. Among the indirect costs, one can list utilities, rent, personal equipment for employees, benefits, and services for workers, marketing, and office equipment. These expenses are not directly connected to the production of chips, but they elevate the performance quality of employees and create favorable conditions for productivity and job satisfaction.

Variable costs depend on the number of goods that the company produces. They can incorporate raw materials and the cost of electricity that changes based on year, season, time of day, and other factors. Labor costs also pertain to this group as they fluctuate on the job market. Fixed costs do not change together with the output of the firm. They include rent of the building and equipment, servicing of the machines, insurance, interest payments, and salaries of some employees whose position is less impacted by the job market.

Conclusion

The manufacturing process of potato chips depends on the type of final product. However, the major steps of making potato slices, frying, and packaging them are similar. The containers for chips also vary, and they are often produced alongside the chips. The primary resources for this business are food ingredients such as potatoes or potato flakes, water, oil, and seasoning. Apart from that, manufacturers need machines and people as well as electricity and facilities to produce goods. Costs are related to these needs as well, going towards labor, resources, utilities, rent, training, and development.

Works Cited

“How Potato Chips Are Made.” YouTube, uploaded by Food Insider. 2018. Web.

How Products Are Made. Web.

Pradhan, Amar Kamlesh, et al. “Review Paper on Semi Automatic Chips Machine.” International Research Journal of Engineering and Technology (IRJET), vol. 4, no. 03, 2017, pp. 1665-1667.

Ugonna, C. U., et al. “A Technical Appraisal of Potato Value Chain in Nigeria.” International Research Journal of Agricultural Science and Soil Science, vol. 3, no. 8, 2013, pp. 291-301.

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IvyPanda. (2021, August 3). Potato Chip: Basics of Cost & Managerial Accounting. https://ivypanda.com/essays/potato-chip-basics-of-cost-amp-managerial-accounting/

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"Potato Chip: Basics of Cost & Managerial Accounting." IvyPanda, 3 Aug. 2021, ivypanda.com/essays/potato-chip-basics-of-cost-amp-managerial-accounting/.

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IvyPanda. 2021. "Potato Chip: Basics of Cost & Managerial Accounting." August 3, 2021. https://ivypanda.com/essays/potato-chip-basics-of-cost-amp-managerial-accounting/.

1. IvyPanda. "Potato Chip: Basics of Cost & Managerial Accounting." August 3, 2021. https://ivypanda.com/essays/potato-chip-basics-of-cost-amp-managerial-accounting/.


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IvyPanda. "Potato Chip: Basics of Cost & Managerial Accounting." August 3, 2021. https://ivypanda.com/essays/potato-chip-basics-of-cost-amp-managerial-accounting/.

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