Sonoco Products Company

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Cost Accounting Applied- Sonoco Products Company Canetra Hanton Strayer University Professor Alex Armstrong March 3, 2013 Cost Accounting Applied – Sonoco Products Company Sonoco Products Company is a global provider of a variety of consumer packaging industrial products, protective packaging, packaging supply chain services and recycling (Sonoco, 2011). Of their three hundred and forty nine (349) different plants located in the United States and overseas, in North America they have eighty one (81) industrial paper products and services, thirty (30) recycling centers, eighty-four (84) consumer product packaging, thirty-one (31) protective packaging, two (2) packaging service locations, two (2) sales offices and the corporate office is located in Hartsville, SC (Sonoco, 2012) In any business the cost allocation process is one of the most difficult. There are three areas that are always involved when allocating cost to products and services; direct material, direct labor and overhead. Direct materials and direct labor are the easiest to calculate because they are traceable to the product or service. When calculating the overhead cost associated with the product or service this is more difficult because most of these are activities that each product run requires but each type of product does not use the same amount of design, setup and run times. There are two ways to accomplish allocating overhead costs to each product and they are direct method and traditional activity-based costing method. The first method is the direct method and it uses one cost driver to determine the overhead cost. A cost driver is any activity used to determine cost (Horngren, 2009). An example of a cost driver is labor hours for product production. Since manufacturing companies normally produce more than one product using one cost driver for the company is not effective. Certain

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