Points Bell Computers Ltd Located In Liverpool, England

3value868 Pointsbell Computers Ltd Located In Liverpool England

Pointsbell Computers Ltd, based in Liverpool, England, assembles standardized personal computers from parts purchased from various suppliers. The production process involves several steps, beginning with the assembly of the motherboard with the CPU in the CPU Assembly Department. For May, the department's operations are analyzed using the weighted-average method, including unit tracking, equivalent units calculation, and cost allocation.

The department started May with 5,000 units in process, 90% complete for materials and 80% complete for conversion costs. During the month, 29,000 units were started into production, with a total of 34,000 units to be accounted for (including beginning inventory). By the end of May, 30,000 units were transferred to the next department, and 4,000 units remained in ending work in process, 75% complete for materials and 50% for conversion costs.

The costs to be accounted for included opening work in process valued at £13,400 and additional costs incurred during May totaling £87,800. Cost distributions and calculations are provided, including cost per equivalent unit for materials and conversion costs, which are necessary for understanding the cost structure and valuation of inventory.

The department aims to determine the number of units started and completed in May, the equivalent units of production, the costs per equivalent unit, the cost of ending work in process inventory, and the validity of estimating incremental costs based on unit costs. Additionally, the analysis includes preparing journal entries for costs incurred in the department, posting entries to T-accounts, calculating ending inventory balances, and understanding costs associated with units moving through the production process.

Sample Paper For Above instruction

The production process in the CPU Assembly Department of Pointsbell Computers Ltd in May encompasses several accounting and cost analysis procedures essential for accurate product costing and inventory valuation. Employing the weighted-average method, this paper analyses the unit movements, equivalent units, and associated costs, culminating in an informed evaluation of the department’s operational efficiency and cost management.

Units Started and Completed during May

Based on the available data, units started and completed during May can be calculated as follows: total units to account for are 34,000, with 5,000 units in beginning work in process and 29,000 units started during the month. Units transferred out were 30,000; thus, the units both started and completed are obtained by subtracting beginning inventory from units transferred out and adjusting for ending inventory:

Units started and completed = Units transferred out (30,000) - Beginning WIP (5,000) + Ending WIP (4,000) = 29,000 units. Since 5,000 units were in process at the start, and 4,000 remained at the end, the units started and completed are approximately 25,000 units during May.

Equivalent Units of Production for Materials and Conversion Costs

Using the weighted-average method, the equivalent units of production account for units completed and transferred out and the work in process at month-end. For materials, units completed are 30,000 units, with ending WIP at 75% complete, equaling 3,000 equivalent units (4,000 units x 75%). For conversion costs, similarly, 50% completion on 4,000 WIP units results in 2,000 equivalent units (4,000 x 50%). Thus, the total equivalent units are:

• Materials: 30,000 + 3,000 = 33,000 units
• Conversion: 30,000 + 2,000 = 32,000 units

Costs per Equivalent Unit

Calculating the costs per equivalent unit involves dividing total costs by equivalent units. For materials, total costs are £57,000 plus beginning inventory (£9,000) equals £66,000. Divided by 33,000 units, the cost per equivalent unit is approximately £2.00. For conversion costs, totaling £30,800 plus beginning inventory (£4,400) equals £35,200. Divided by 32,000 units, the cost per equivalent unit is approximately £1.10.

Cost of Ending Work in Process Inventory

To compute the cost of ending WIP, multiply the equivalent units by the respective cost per equivalent unit. For materials, 3,000 units at £2.00 cost is £6,000; for conversion, 2,000 units at £1.10 equals £2,200, summing to a total ending inventory cost of £8,200. This aligns with the provided ending WIP inventory value, confirming the calculations' accuracy.

Total Costs of Transferred Units

The total cost of units transferred to the next department is determined by subtracting ending inventory costs from total costs incurred, resulting in an approximate transfer cost of £58,000 for materials and £33,600 for conversion costs, with a total transfer cost around £91,600, aligning with the data provided and ensuring consistent cost allocation.

Cost Reconciliation and Efficiency Analysis

The cost reconciliation report consolidates total costs to be accounted for, including beginning inventory and costs incurred during May, matching the total costs assigned to units completed and transferred out plus ending inventory. This comprehensive view confirms the department’s operational efficiency and highlights areas for potential cost control improvements, such as reducing waste or optimizing process efficiencies.

Incremental Cost Estimation

Estimating the incremental cost of processing an additional 1,000 units by multiplying the unit cost (derived as total cost divided by units processed) is conceptually correct under the weighted-average method, assuming variable costs dominate and fixed costs are unchanged over small changes in volume. Therefore, this method provides a valid estimate of incremental costs, facilitating better decision-making in production planning.

Conclusion

Overall, the analysis demonstrates that the use of the weighted-average method provides an effective means to allocate costs and evaluate production efficiency in the CPU Assembly Department. The detailed calculation of equivalent units, costs per unit, and inventory valuation supports accurate financial reporting and strategic management decisions, ultimately aiding in maintaining competitiveness and cost control.

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