Assignment 1 Questions Q1: Process Costing and decision making Kevin LTD is a local branch of Lava laptop Production Company in India. The company is producing an economy brand of laptop for students. The company’s production processes are split into two separate departments. Department 1 produces Motherboards and sends them to Department 2. Department 2 receives the Motherboards from Department 1 as ‘Transferred In’ and starts working on them by adding further parts including CPU, System Memory, Video Card, Screen, External Ports, Hard Drive, etc. All parts are added at the beginning of the process except the Hard Drive, which is added when the production is 50% complete. All parts together (except the Hard Drive) are called ‘Basic Parts’. The conversion cost is added evenly during the process. The inspection point is at the 80% stage of production. Normal spoilage is 4% of all good units that pass inspection during the period. Spoiled units are disposed of at zero net disposal value. Beginning work in process (BWIP) at the beginning of the month was 20% complete, and the ending work in process (EWIP) was 85% complete at the end of the month. The following additional information is available for the month of September this year in Department 2: Physical units Transfer in Costs (motherboards) ($) Basic Parts (S) Hard Drives ($) Conversion Costs ($) 5000 150,000 250,000 Costs added during September: Items Costs ($) Transfer In units CPUs System Memories 500,000 250,000 180,000 Video Cards 200 Required: a. Prepare a full process cost report (including all five steps) for Department 2 of Kevin LTD for the month of September by using the weighted average method. b. An outside supplier offers to provide Kevin LTD with all Motherboards needed for the month on a regular basis for a fixed price of 85% costs charged by Department 1. Discuss at least two financial and two non-financial factors that Kevin LTD should consider before accepting the offer. Answer

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