Question 3: Process Costing [42 marks]

TeleFone Ltd assembles various components used in the telecommunications industry. The companys major product, a relay switch, is made by assembling three parts: A453, B344 and C543. The following information relates to activities in March:

• Beginning work-in-process inventory: 12,500 units, 60 percent complete as to conversion; cost, $625,000 (direct materials, $487,500; conversion cost, $137,500).

• Production started: 87,500 units.

• Production completed: 85,000 units.

• Ending work-in-process inventory: 15,000 units, 40 percent complete as to conversion.

• Direct materials used: A453, $387,500; B344, $937,500; C543, $625,000.

• Hourly wage of direct labourers, $20; total direct-labour payroll, $158,500.

• Overhead application rate: $28 per direct-labour hour.

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

  Required: Show ALL your workings. (Round your answer to 2 decimal)

  Part A

i. If the company uses Weighted Average cost to allocate costs to production:

a. b. c.

Calculate the total cost of direct material and conversion during March. Determine the cost of goods completed during the month of March.

Determine the cost of the work-in-process inventory on the 31 March.

(6 marks) (6 marks) (4 marks)

Regarding the ending work-in-process inventory:

4. How much direct material cost would be added to these units in April? Please provide an explanation. (3 marks)

5. What percentage of conversion would be performed on these units in April? Please provide an explanation.