Bell Computers, Ltd., located in Liverpool, England, assembles a standardized personal computer from parts it purchases from various suppliers. The production process consists of several steps, starting with assembly of the mother circuit board, which contains the central processing unit. This assembly takes place in the CPU Assembly Department. The company recently hired a new accountant who prepared the following report for the department for May using the weighted-average method:
Units to be accounted for:
Work in process, May 1: materials 90%
Complete; conversion 80% complete . . . . . . . . . . . . .£5,000
Started into production . . . . . . . . . . . . . . . . . . . . . . . . . . £29,000
Total units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £34,000
Units accounted for as follows:
Transferred to next department . . . . . . . . . . . . . . . . . . . £30,000
Work in process, May 31: materials 75%
Complete; conversion 50% complete . . . . . . . . . . . . .£4,000
Total units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . £34,000
Cost Reconciliation
Cost to be accounted for:
Work in process, May 1 . . . . . . . . . . . . . . . . . . . . . . . . . £13,400
Cost added in the department . . . . . . . . . . . . . . . . . . . £87,800
Total cost to be accounted for . . . . . . . . . . . . . . . . . . . . £101,200
Cost accounted for as follows:
Work in process, May 31 . . . . . . . . . . . . . . . . . . . . . . . . £ 8,200
Transferred to next department . . . . . . . . . . . . . . . . . . .£93,000
Total cost accounted for . . . . . . . . . . . . . . . . . . . . . . . . £101,200
The company's management would like some additional information about May's operation in the CPU Assembly Department. (The currency in England is the pound, which is denoted by the symbol £.)
Required:
1. How many units were started and completed during May?
2. What were the equivalent units for May for materials and conversion costs?
3. What were the costs per equivalent unit for May? The following additional data are available concerning the department's costs:
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4. Verify the accountant's ending work in process inventory figure (£8,200) given in the report.
5. The new manager of the CPU Assembly Department was asked to estimate the incremental cost of processing an additional 1,000 units through the department. He took the unit cost for an equivalent whole unit you computed in (3) above and multiplied this figure by 1,000. Will this method yield a valid estimate of incremental cost?Explain.