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 (8,000 units)			Commuter (13,000 units)			Sport (19,000 units)			Retirement (5,000 units)
Materials	$	380,000		$	30,000		$	104,000		$	171,000		$	75,000
Conversion costs:
Assembly	$	180,000
Polishing		96,000
Special Finishing		50,000
Packaging		135,000
Total conversion costs	$	461,000

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.)

Answer 1

	Gag-Gift	Commuter	Sport	Retirement
Materials	30000	104000	171000	75000
Conversion cost allocation :
Assembly [ ( 8000 : 13000 : 19000 : 5000 ) Total units - 45000 ]	32000	52000	76000	20000
Polishing [ ( 0 : 13000 : 19000 : 0 ) Total units - 32000 ]	0	39000	57000	0
Special Finishing [ ( 0 : 0 : 0 : 5000 ) Total units - 5000 ]	0	0	0	50000
Packaging [ ( 8000 : 13000 : 19000 : 5000 ) Total units - 45000 ]	24000	39000	57000	15000
Total cost	86000	234000	361000	160000
(/) Number of units produced	8000	13000	19000	5000
Cost per unit	10.75	18.00	19.00	32.00