Explain why starting large number of wafers into production

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Reference no: EM13327348

Techno Enterprises is a manufacturer of microchips (Referred to as chips). Its production process is complex and involves more than 100 steps, starting with production of small, round silicon wafers and ending with chips being put into individual packages that protect them and provide connections to the products for which the chips are developed. The company uses a process costing system and has always made the simplifying assumption that wafers in production, but not yet finished, are 50 percent complete with respect to conversion costs. In the current year, the company has struggled due to a decline in computer sales and reduced demand for chips.To boost profit, the company has decided to start a very large number of wafers into production in the last few days of the year. Due to the use of ceramic carriers and other high-performance features, the Techno Enterprises production process typically takes 30 days. Explain why a starting a large number of wafers into production for Techno Enterprises will boost profit even though the chips that ultimately result from the wafers have not been sold or even completed. After reading over the situation that Techno Enterprises is facing, do you think the company's approach to boosting its profit is completely ethical? Is it sound business practice?

Reference no: EM13327348

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