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 $ 428,000 Gag Gift (6,200 units) S 31,000 Commuter (11,200 units) $ 98,000 Sport (15.400 units) $ 231,000 Retirement (3.200 units) $ 68,000 Materials Conversion costs: Assembly Polishing Special Finishing Packaging Total conversion costs $ 144,000 79,800 32,000 108,000 S 363,800 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.) Cost Per Unit Gag-Gift Commuter Sport Retirement

Answer 1

Answer:

Conversion costs are allocated based on Number of units processed in each department

Gag-gift is transferred to assembly then Packaging and then to finished goods

Commuter and sport are transferred to assembly to polishing to packing and then to finished goods

Retirement is transferred to assembly to special finishing to packing and then to finished goods

So, Assembly conversion costs are to be allocated to all four departments

Polishing conversion costs are to be allocated to both Commuter and sport departments

Special finishing conversion cost is allocated only to Retirement department

Packaging conversion costs are to be allocated to all four departments

		Gag-Gift (6,200 units)	Commuter (11,200 units)	Sport (15,400 units)	Retirement (3,200 units)	Total
	Materials	$31,000	$98,000	$231,000	$68,000	$428,000
	Conversion Costs
	Assembly (62/360,112/360,154/360,32/360)	$24,800	$44,800	$61,600	$12,800	$144,000
	Polishing (112/266,154/266)	-	$33,600	$46,200	-	$79,800
	Special Finishing (Retirement only)	-	-	-	$32,000	$32,000
	Packaging (62/360,112/360,154/360,32/360)	$18,600	$33,600	$46,200	$9,600	$108,000
A	Total cost transferred to finished goods	$74,400	$210,000	$385,000	$122,400	$791,800
B	No. of units Produced	6,200	11,200	15,400	3,200
C	Cost per unit transferred to finished goods (A/B)	$12	$18.75	$25	$38.25

Assembly conversion costs are allocated by

= [(Total Assembly conversion costs / Total units processed ) * Units belong to each department

Gag-gift = [($144,000 / 36,000) * 6,200 units] = $24,800

Commuter = [($144,000 / 36,000) * 11,200 units] = $44,800

Sport = [($144,000 / 36,000) * 15,400 units] =$61,600

Retirement = [($144,000 / 36,000) * 3,200 units] =$12,800

Polishing Conversion cost are allocated in ratio of 11200 : 15400 to commuter and sport respectively. i.e., $33,600 to commuter and $46,200 to sport.

Special Finishing costs are completely allocated to Retirement department

Packaging conversion costs are allocated by

= [(Total Packaging conversion costs / Total units processed ) * Units belong to each department

Gag-gift = [($108,000 / 36,000) * 6,200 units] = $18,600

Commuter = [($108,000 / 36,000) * 11,200 units] = $33,600

Sport = [($108,000 / 36,000) * 15,400 units] =$46,200

Retirement = [($108,000 / 36,000) * 3,200 units] =$9,600

	Cost per Unit
Gag-gift	$12
Commuter	$18.75
Sport	$25
Retirement	$38.25

Answer 2

for polish commuter 79,800*11,200/26,600= 33,600

26,600= 11,200+ 15,400 units