The Zygon Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June and 425,000 chips were completed.
Ending inventory was 50% complete as to conversion costs.
Required:
a. What is the total manufacturing cost per chip for June?
b. Allocate the total costs between the completed chips and the chips in ending inventory.

Question

Quizplus · Accepted Answer

The Answer is a.
a. Equivalent unit for conversion costs = 425,000 completed + (50,000 × 0.5 completed) = 425,000 + 25,000 = 450,000 b. Completed units = $11.27 × 425,000 = $4,789,750 Ending work in process = Direct materials = 50,000 × $1.88 = $94,000 Conversion costs = 25,000 × $9.39 = 234,750 Total $328,750

a. Equivalent unit for conversion costs = 425,000 completed + (50,000 × 0.5 completed) = 425,000 + 25,000 = 450,000 b. Completed units = $11.27 × 425,000 = $4,789,750 Ending work in process = Direct materials = 50,000 × $1.88 = $94,000 Conversion costs = 25,000 × $9.39 = 234,750 Total $328,750

Equivalent unit for conversion costs =
425,000 completed + (50,000 × 0.5 completed) =
425,000 + 25,000 = 450,000
b.
Completed units = $11.27 × 425,000 = $4,789,750
Ending work in process = Direct materials = 50,000 × $1.88 = $94,000
Conversion costs = 25,000 × $9.39 = 234,750
Total $328,750

The Zygon Corporation Was Recently Formed to Produce a Semiconductor