The Wynnum Corporation Was Recently Formed to Produce a Semiconductor

question 111

Essay

The Wynnum 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 Wynnum's first month of operations,and therefore,there was no beginning inventory.Direct materials cost for the month totalled $895 000,while conversion costs equalled $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:

Efficient

The quality of achieving maximum productivity with minimum wasted effort or expense.

Cycle Inventory

Inventory that is held to manage the normal fluctuation of production or supply and demand, rotating through cycles of replenishment.

Safety Inventory

Extra stock kept in storage to guard against uncertainty in demand or supply, ensuring product availability.

Seasonal Inventory

Inventory that is purchased or produced in anticipation of season-based demand increases, such as holiday merchandise.