Question
Glencove Co. is a Chinese company that manufactures Smartphones. It has two divisions. Division A produces mobile framework and sends them to Division B. Division
Glencove Co. is a Chinese company that manufactures Smartphones. It has two divisions. Division A produces mobile framework and sends them to Division B. Division B receives the mobile framework as Transferred In and inserts parts like screens, chips, memory, etc into the mobile framework. These parts are collectively referred to as Main Parts. The battery is added when the production is 50% complete. The conversion cost is added evenly during the process.
The inspection point is at 80% stage of production. Normal spoilage is 4% of all good units that pass inspection during the period. Spoiled units are disposed at zero net disposable value. Beginning work in process at the beginning of the month was 20% complete, and the ending work in process was 85% complete at the end of the month.
| Physical units | Transfer in Cost | Main Parts | Battery | Conversion Cost |
Beginning work in process | 5000 | 150,000 | 250,000 |
| 120,000 |
Transferred in | 20,000 |
|
|
|
|
Good units completed and transferred out | 21000 |
|
|
|
|
Ending work in process | 1000 |
|
|
|
|
Costs added during the Month
Transfer In units | 500,000 |
Main Parts | 1,230,000 |
Battery | 500,000 |
Conversion | 400,000 |
Total costs | 2,630,000 |
- Prepare a Process Costing Production Report for Division B (Weighted Average Method) of Glencove Co.
- ABC LTD offers to provide Glencove Co with all batteries needed for the month for a fixed price of 85% of costs charged by Division A. What are two financial and two non-financial factors that Glencove Co should consider before agreeing to this.
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