Question

In: Accounting

Ferdon Watches, Inc., makes four models of watches, Gag-Gift, Commuter, Sport, and Retirement. Ferdon manufactures the...

Ferdon Watches, Inc., makes four models of watches, Gag-Gift, Commuter, Sport, and Retirement. Ferdon manufactures the watches in four departments: Assembly, Polishing, Special Finishing, and Packaging. All four models are started in Assembly where all material is assembled. The Gag-Gift is transferred to Packaging, where it is packaged and transferred to finished goods inventory. The Commuter and Sport are assembled, then transferred to Polishing. Once the polishing process is completed, they are transferred to Packaging and then finished goods. The Retirement model is assembled and then transferred to Special Finishing, and then Packaging. When packaged, it is transferred to finished goods.

Data for October are shown in the following table. Conversion costs are allocated based on the number of units processed in each department.

Total Gag-Gift
(6,600 units)
Commuter
(11,600 units)
Sport
(16,200 units)
Retirement
(3,600 units)
Materials $ 455,000 $ 33,000 $ 116,000 $ 243,000 $ 63,000
Conversion costs:
Assembly $ 114,000
Polishing 55,600
Special Finishing 32,400
Packaging 76,000
Total conversion costs $ 278,000

Required:

b. What is the cost per unit transferred to finished goods inventory for each of the four watches in October? (Round "Cost Per Unit" to 2 decimal places.)

Solutions

Expert Solution

` Gag-Gift Commuter Sport Retirement
     6,600       11,600      16,200          3,600
Materials $455,000 $33,000 $ 116,000 $243,000 $    63,000
Conversion costs:
Assembly $114,000 $19,800 $   34,800 $ 48,600 $    10,800
Polishing $ 55,600 $        -   $   23,200 $ 32,400 $            -  
Special Finishing $ 32,400 $    32,400
Packaging $ 76,000 $13,200 $   23,200 $ 32,400 $      7,200
Total conversion costs $278,000 $33,000 $   81,200 $113,400 $    50,400
Total Costs $733,000 $66,000 $ 197,200 $356,400 $ 113,400
Cost Per Unit $ 10.00 $     17.00 $    22.00 $      31.50
Gag-Gift        6,600
Commuter      11,600
Sport      16,200
Retirement        3,600
Total      38,000
Commuter      11,600
Sport      16,200
Total      27,800


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