Stochastic Process Costing

Abstract

Kleeford Distilled Compounds (KDC) are manufacturers of artificial flavourings and colourings for the food industry. One of their most important products is synthetic lemon oil, which is made by a three-stage distillation process. Each stage involves a prolonged period of heating, followed by a period in which the product settles into layers. This settlement must be completed before the product can be further processed; as a consequence, each of the three stages of distillation lasts a full working week.