Q1) Bell Computers, Ltd., located in Liverpool, England, assembles standardized personal computer from parts it buys from different suppliers. Production process comprises of many steps, starting with assembly of \"mother\" circuit board, that contains central processing unit. This assembly takes place in CPU Assembly Department. The company recently hired new accountant who prepared following report for department for May using weighted-average method:
| Quantity Schedule |
|
| Units to be accounted for: |
|
| Work in process, May 1 (materials 90% complete; conversion 80% compete) |
5,000 |
| Started into production |
29,000 |
| Total units |
34,000 |
| Units to be accounted for as follows: |
|
| Trasferred to next department |
30 |
| Work in process, May 31 (materials 75% complete; conversion 50% compete) |
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 |
| Trasferred to next department |
93,000 |
| Total cost accounted for |
£101,200 |
Company's management would like some extra information about May\'s operation in CPU Assembly Department. (Currency in England is pound, which is denoted by symbol £.)
New manager of CPU Assembly Department was asked to evaluate incremental cost of processing extra 1,000 units through department. He took unit cost for equivalent whole unit you completed in (3) above and multiplied this figure by 1,000. Will this method yield valid estimate of incremental cost? Describe.