The Zygon Corporation Was Recently Formed to Produce a Semiconductor

question 47

Essay

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.

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Definitions:

Economics

The discipline within social science that examines the decision-making process of individuals, governments, companies, and countries in distributing resources to fulfill their desires and requirements.

S Corporations

A special tax status granted to certain corporations, allowing income to be passed through to shareholders and taxed at individual rates.

Proprietorship

A business owned and operated by a single individual, with no legal distinction between the owner and the business.

Taxed

This pertains to the imposition of a financial charge or levy upon a taxpayer by a governmental organization.