Candid, Inc., is a manufacturer of digital cameras. It has two departments: asse

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. 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? 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.

Explanation / Answer

Answer 1: Unit cost = Total Cost incurred / No. of units produced

= $1605000 / 5000

= $321

Answer 2. Calculation of equivalent units

Material Conversion cost Completed Units 4000 4000 Incomplete Units 1000 60% of 1000 = 600 Equivalent units 5000 4600 Cost incurred $800000 $805000 Cost per unit of equivalent units $160 $175 Cost of transferred units 4000units * $160 = $640000 4000*$175 = $700000 Cost of WIP 1000units * $160 = $160000 600*$175 = $105000

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