To complete our discussion of cost flows in a process costing system, in this section we
show journal entries relating to materials, labor, and overhead costs at Megan’s Classic
Cream Soda, a company that has two processing departments—Formulating and Bot-
tling. In the Formulating Department, ingredients are checked for quality and then mixed
and injected with carbon dioxide to create bulk cream soda. In the Bottling Department,
bottles are checked for defects, filled with cream soda, capped, visually inspected again
for defects, and then packed for shipping.