Question

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 (5,200 units)			Commuter (10,200 units)			Sport (13,400 units)			Retirement (2,200 units)
Materials	$	382,000		$	13,000		$	102,000		$	201,000		$	66,000
Conversion costs:
Assembly	$	155,000
Polishing		94,400
Special Finishing		24,200
Packaging		124,000
Total conversion costs	$	397,600

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.)

Answer 1

	Total	Gag-Gift	Commuter	Sport	Retirement
		(5,200 units)	(10,200 units)	(13,400 units)	(2,200 units)
Materials	382,000	13,000	102,000	201,000	66,000
Conversion costs:
Assembly	155,000	26000	51000	67000	11000
Polishing	94,400		40800	53600
Special Finishing	24,200				24,200
Packaging	124,000	20800	40800	53600	8800
Total conversion costs	397,600	46800	132600	174200	44000
Total cost		59,800	234,600	375,200	110,000
Number of units		5200	10200	13400	2200
Cost per unit transferred to Finished Goods		11.50	23.00	28.00	50.00
Workings
Number of units in Assembly = 5200+10200+13400+2200 = 31000
Cost per unit = 155000/31000 = $5 per unit
Assigned = Number of units*Cost per unit
Number of units in polishing = 10200+13400 = 23600 units
Per unit cost = 94400/23600 = 4 per unit
Number of units in Special finishing = 2200
Number of units in packaging = 31000