Process Costing Cooks Linen Company (CLC) manufactures designer bed linen. The company prints specially designed photographic images on quality cotton that is then manufactured into duvets. Large parts of the manufacturing process are automated.

The companys production processes are split into two separate departments. The Printing Department is fully automated and uses fabric cutting machines to pre-cut the fabric to the required size (at the 10% point in the process) and printing machines to apply photographic patterns to the fabric. Ink is added to the printing machines at the 30% point in the process. These patterned fabric pieces are then transferred to the Assembly Department. In the Assembly Department, the duvet backing is pre-cut from fabric using another cutting machine (at the 5% point in the process), and a machinists then construct the duvet from the printed and un-printed fabric pieces. At the 95% point in the process the Assembly Department packages the finished duvets for transfer to the distribution warehouse. In both departments conversion costs are added evenly through-out the production process.

Currently, there are two quality inspections performed. In the Printing Department, the cotton is inspected after it has been cut and prior to adding the material to the printing machine (at the 25% point in the production process). The purpose of this inspection is to identify any flaws in the material that can cause the printing machine to jam. The second quality inspection is in the Assembly Department, where the finished duvetsare inspected just prior to packaging (at the 90% point in the inspection process). The General Manager is concerned that currently there is a high level of spoilage being generated in the Assembly Department with normal spoilage of 10% of good units passing inspection during the month. In contrast, the level of normal spoilage in the Printing Department is only 1% of the good units passing inspection during the month. However, the Assembly Department manager has identified that a significant portion of the spoilage in that department relates to flaws with the printed design applied by the Printing Department.

Spoilage identified in the Printing Department is has no scrap value and the cost of disposal is included in the overhead costs. Spoilage identified in the Assembly Department is sold as scrap to a linen clearance outlet that pays $10 per physical unit of spoilage.

At the start of September 2019 the Printing Department had 200 partially finished units that were 30% complete. During the month 4,400 units were started, ending work-in-process was 250 units, 60% complete. The total spoilage for the month was 50 units.

The costs for the Printing department are collated below:

Costs	Printing Department
Opening Work-in process:
Fabric	$10,000
Ink	$4,000
Overheads	$25,800
Costs added during September
Fabric	$224,400
Ink	$85,800
Overheads	$88,000

The Assembly Department had 300 units 75% complete at the start of the September. During the month 4,100 good units were completed and transferred to finished goods, and closing work-inprogress was 20 units, 30% complete.

A summary of the costs in the Assembly Department has been provided below:

Costs	Assembly Department
Opening Work-in process:
Transferred- In Costs	28,650
Fabric	6,000
Direct Labour	$5,000
Overhead Costs	$4,000
Costs added during September
Transferred- In Costs	???
Fabric	$85,570
Packaging	$8,000
Direct Labour	$95,000
Overhead Costs	$75,000

Required: Taking the role of the management accountant for the company:

a) Prepare the process cost reports for the two departments using the weighted average method. Include details of the total cost per good unit completed and transferred out for the two departments in your process cost reports. Assume all completed units from the Printing Department were transferred directly to the Assembly Department during September.

b) Prepare the work-in-process ledger accounts for the two departments as at 30 September 2019.

c) Prepare a short memo (1 page maximum) for the general manager discussing the level of spoilage in the two processes. Referring to the likely causes of spoilage in the two processes, make a recommendation to the general manager regarding how to reconfigure the inspection processes to reduce the level of spoilage