Question

Texarkana Corporation assembles various components used in the computer industry. The company's major product, a disk drive, is the result of assembling three parts: JR1163, JY1065, and DC0766. The following information relates to activities of April:
•	Beginning work-in-process inventory: 3,000 units, 80 percent complete as to conversion; cost, $293,940 (direct material, $230,000; conversion, $63,940).
•	Production started: 27,000 units.
•	Production completed: 26,000 units.
•	Ending work-in-process inventory: 4,000 units, 45 percent complete as to conversion.
•	Direct material used: JR1163, $225,000; JY1065, $710,000; DC0766, $455,000.
•	Hourly wage of direct laborers, $21; total direct-labor payroll, $134,274.
•	Overhead application rate: $69 per direct-labor hour.

All parts are introduced at the beginning of the manufacturing process; conversion cost is incurred uniformly throughout production.

1. Determine the cost of the work-in-process inventory on April 30.

2. W

ith regard to the ending work-in-process inventory:

How much direct-material cost would be added to these units in May? What percentage of conversion would be performed on these units in May? 3. Assume that the disk drive required the addition of another part (TH55) at the 75 percent stage of completion. How many equivalent units with respect to part TH55 would be represented in April's ending work-in-process inventory?

Answer 1

Solution:

1) Cost of the work-in-process inventory on April 30: $257,400

Working:

	DM	Conversion	Total
WIP, April-1	230,000	63,940	293,940
Cost incurred during April	1,390,000	575,460	1,965,460
Total costs to account for	1,620,000	639,400	2,259,400
Equivalent units	30,000	70,000
Cost per equivalent	54	23	77

Direct material (4,000 * 54)	216,000
Conversion cost (1800 * 23)	41,400
Total	257,400

2) a) During the month of May, no material would be added. All materials are introduced at the beginning of the manufacturing process, and these units begun in the month of April.

b) In the month of May 55% of the conversion would be done because 45% has been completed at the end of April

3) Ending work-in-process inventory is at 45% stage of completion, and all units should have reached 75% point in April when TH55 was added. Thus there would be zero equivalent units in regard to part TH55 in ending work-in-process inventory.