Question

Candid, Inc., is a manufacturer of digital cameras. It has two departments: assembly and testing. In January 2014, the company incurred $800,000 on direct materials and $805,000 on conversion costs, for a total manufacturing cost of $1,605,000.
1. Assume there was no beginning inventory of any kind on January 1, 2014. During January, 5,000 cameras were placed into production and all 5,000 were fully completed at the end of the month. What is the unit cost of an assembled camera in January?

2. Assume that during February 5,000 cameras are placed into production. Further assume the same total assembly costs for January are also incurred in February, but only 4,000 cameras are fully completed at the end of the month. All direct materials have been added to the remaining 1,000 cameras. However, on average, these remaining 1,000 cameras are only 60% complete as to conversion costs.

(a) What are the equivalent units for direct materials and conversion costs and their respective costs per equivalent unit for February? (b) What is the unit cost of an assembled camera in February 2014?

3. Explain the difference in your answers to requirements 1 and 2.

Answer 1

Answer:

1) Unit Costs= Total Costs/ No of Units=  $ 321

2)The unit cost of an assembled camera in February 2014  $ 335

Explanation:

Candid, Inc.

Direct materials $800,000

Conversion costs, $805,000

Total manufacturing cost $1,605,000.

We find the unit costs by dividing the total cost with the number of units produced.

Units Produced 5,000

1) Unit Costs= Total Costs/ No of Units= $1,605,000 /5,000= $ 321

2)      Particulars         Units           % of Completion        Equivalent Units

                                                       D. Materials    C.C       D. Mat    C. Costs

       Production         4000         100                 100        4000           4000

   Still in Process     1000           100                60           1000           600

Total Equivalent Units                                                       5000        4600

We find the number of Equivalent units to find the exact costs incurred.

Feb Equivalent units for direct materials = 5000

Feb Equivalent units for  conversion costs = 4600

Direct materials costs per Equivalent units = $800,000 /5000= $160  

Conversion costs per Equivalent units = $805,000/4600= $ 175

2-b) The unit cost of an assembled camera in February 2014= $160  + $ 175= $ 335

3) There is a difference in the unit costs of 1 and 2 because  in situation 1  5000 units were completed and in situation 2 only 4600 units were completed with the same costs. There's a difference of $ 14 . The Feb costs are $ 14 more  because of the difference in number of units.