Answered Essay: SnapshotSnapshot​, Inc. is a manufacturer of digital cameras. It has two​ departments: assembly and testing. In January

SnapshotSnapshot​, Inc. is a manufacturer of digital cameras. It has two​ departments: assembly and testing. In January

2014​,

the company incurred

$850,000

on direct materials and

$825,000

on conversion​ costs, for a total manufacturing cost of

$1,675,000.

Requirements

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 February5,000

cameras are placed into production. Further assume the same total assembly costs for January are also incurred in​ February, but only4,000

cameras are fully completed at the end of the month. All direct materials have been added to the remaining1,000

cameras.​ However, on​ average, these remaining1,000

cameras are only25​%

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 February2014​?

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

Expert Answer

 

1.

Total manufacturing cost incurred during January, 2014 = $1,675,000

Number of cameras completed during Januay, 2014 = 5,000

Therefore,

Unit cost of an assembled camera in​ January = $1,675,000 ÷ 5,000 = $335

2.

(a)

Equivalent units for direct materials

= Units fully completed + (Units in ending inventory x Percent complete)

= 4,000 + (1,000 x 100%)

= 5,000

Equivalent units for conversion costs

= Units fully completed + (Units in ending inventory x Percent complete)

= 4,000 + (1,000 x 25%)

= 4,250

Cost per equivalent unit for materials

= Material cost incurred ÷ Equivalent units for materials

= $850,000 ÷ 5,000

= $170

Cost per equivalent unit for conversion costs

= Conversion costs incurred ÷ Equivalent units for conversion costs

= $825,000 ÷ 4,250

= $194.1176

(b)

Unit cost of an assembled camera in February

= Cost per equivalent unit for materials + Cost per equivalent unit for conversion costs

= $170 + $194.1176

= $364.1176

3.

The unit cost of an assembled camera in February is greater than that in January because less number of cameras were completed during February than in January but the cost incurred for both the months was equal.

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