Brokia Electronics manufactures three cell phone models, which differ only in th

Question

Brokia Electronics manufactures three cell phone models, which differ only in the components included: Basic, Photo, and UrLife. Production takes place in two departments, Assembly and Special Packaging. The Basic and Photo models are complete after Assembly. The UrLife model goes from Assembly to Special Packaging and is completed there. Data for July are shown in the following table. Conversion costs are allocated based on the number of units produced. There are no work-in-process inventories.

Required:

a)   What is the cost per unit transferred to finished goods inventory for each of the three phones in july? (Round your final cost per unit answers to two decimal places)

b)  The UrLife modelis sold only to the government on a cost-plus basis. The marketing vice-president suggests that conversion costs in Assembly could be allocated on the basis of material costs so he can offer a lower price for the basic model.

1) What cost would be reported for the three models if the marketing vice-president's suggestion is adopted? (Round "cost per unit" to 2 decimal places)  

2)   Would this be ethical?

Total Basic (50,000 units) Photo (50,000 units) UrLife (10,000 units) Materials 2,420,000 498,000 1,218,000 704,000 Conversion Costs: Assembly 2,238,500 Special Packaging 618,000 Total Conversion Costs 2,856,500

Explanation / Answer

Total Basic (50,000 units) Photo (50,000 units) UrLife (10,000 units) Materials 2,420,000 498,000 1,218,000 704,000 Conversion Costs: Assembly 2,238,500 1017500 1017500 203500 Special Packaging 618,000 618,000 Total Conversion Costs 2,856,500 1017500 1017500 821500 Total cost                             5,276,500                     1,515,500          2,235,500    1,525,500 Units                           50,000                50,000          10,000 Cost per unit                                   30                        45                153 If suggestion accepted Total Basic (50,000 units) Photo (50,000 units) UrLife (10,000 units) Materials 2,420,000                         498,000          1,218,000       704,000 Conversion Costs: Assembly 2,238,500                         460,650          5,474,886    1,293,846 Special Packaging 618,000       618,000 Total Conversion Costs 2,856,500                         460,650          5,474,886    1,911,846 Total cost                             5,276,500                         958,650          6,692,886    2,615,846 Units                           50,000                50,000          10,000 Cost per unit                                   19                      134                262 conversion cost must be allocated on the basis ofunits produced which is ethical.

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