Panoramic, Inc. is a manufacturer of digital cameras. It has two departments: as
ID: 2559399 • Letter: P
Question
Panoramic, Inc. is a manufacturer of digital cameras. It has two departments: assembly and testing. In January 2014, the company incurred $875,000
on direct materials and $775,000 on conversion costs, for a total manufacturing cost of $1,650,000.
Requirements
1.
2
3.
Explain the difference in your answers to requirements 1 and 2.
Requirement 1. Assume there was no beginning inventory of any kind on January 1,2014. During January, 20,000 cameras were placed into production and all 20,000 were fully completed at the end of the month. What is the unit cost of an assembled camera in January? (Round your answers to the nearest cent.)
1.
Assume there was no beginning inventory of any kind on January 1, 2014. During January, 20,000 cameras were placed into production and all 20,0000 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 20,000 cameras are placed into production. Further assume the same total assembly costs for January are also incurred in February, but only 18,000 cameras are fully completed at the end of the month. All direct materials have been added to the remaining 2,000 cameras. However, on average, these remaining 2,000 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.
Direct materials cost per unit Conversion cost per unit Assembly department cost per unitExplanation / Answer
1. Since all the raw material are converted and made, the total cost :
Direct materials cost per unit = 875000/20000 = 43.75
Conversion cost per unit = 775000/20000 = 38.75
Total cost per unit = 43.75+38.75 = 82.5
2. Equivalent unit for materials = 20000
Equivalent unit for conversion = 18000+0.6*2000 = 19200
Direct materials cost per unit = 875000/20000 = 43.75
Conversion cost per unit = 775000/19200 = 40.36
Total cost per unit = 43.75+40.36 = 84.11
3. The answer is different in both the parts because the units that were to be assigned the total costs were different in both the parts. Since the conversion were incomplete in February, they were assigned higher per unit costs.
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