Question

Howrley-David, Inc., manufactures two models of motorcycles: the Fatboy and the Screamer. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is the cost of materials. The following data are available for August:
Fatboy Screamer Total
Number of units assembled 2,000 4,000 6,000
Materials cost per unit $ 2,000 $ 3,000
Other costs:
Direct labor $ 6,000,000
Indirect materials 1,800,000
Other overhead 4,200,000
Required:
Howrled-David uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in August.
fatboy screamer total
operation cost
materials cost
total cost
number of units
unit cost

Answer 1

Answer:

                                                            Fatboy         Screamer          Total

Direct labor                                 .   $ 2,000,000   $ 4,000,000   $ 6,000,000

Indirect materials                        .       $600,000    $1,200,000    $1,800,000

Other overhead                          .    $1,400,000   $2,800,000    $4,200,000

Materials cost                              .    $4,000,000  $12,000,000   $16,000,000                                                          

Total cost                                     .   $8,000,000 $20,000,000 $28,000,000

Number of units                           .       2,000              4,000               6,000

Unit cost                                       .      $4,000            $5,000            $4,667

Explanation:

Assign the Material Cost to the Products appropriately. The conversion costs musts be allocated based on the number of units assembled. Conversion costs is the sum of Direct Labor and Manufacturing Overheads (Indirect Costs).