Canada Revenue Agency (CRA) must process millions of income tax returns yearly. When the taxpayer sends in a return, documents such as withholding statements and cheques are matched against the data submitted. Then, various other inspections of the data are conducted. Some returns are more complicated than others so the expected time allowed to process a return is geared to an “average” return. Some work-measurement experts have been closely monitoring the processing at a particular branch. They are seeking ways to improve productivity. Suppose 3 million returns were received on April 30. On May 17, the work-measurement teams discovered that all supplies (punched cards, inspection check-sheets, and so on) had been affixed to the returns, but 40 percent of the returns still had to undergo a final inspection. The other returns were fully completed.

1. Suppose the final inspection represents 20 percent of the overall processing time in this process. Compute the total work done in terms of equivalent units.

2. The materials and supplies consumed were $600,000. For these calculations, materials and supplies are regarded just like direct materials. The conversion costs were $4,830,000. Compute the unit costs of materials and supplies and of conversion.

3. Compute the cost of the tax returns not yet completely processed.