Question

Nevada Instruments manufactures two models of calculators. The finance model is the Financial 5 and the scientific model is the Scientific 6. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is in the cost of the parts. The following data are available for August:
	Financial 5	Scientific  6	Total
Number of units	11,000	44,000	55,000
Parts cost per unit	$25	$30
Other costs:
Direct labor			$ 68,200
Indirect materials			19,250
Overhead			77,550
Total			$165,000
REQUIRED
Nevada Instruments uses operations costing and assigns conversion costs based on the number of units assembled.
Compute the cost per unit of the Financial 5 and Scientific 6 models for August. Show all calculations.
			Answers
Financial 5
Scientific 6

Answer 1

For calculating cost per unit of each model, we need to allocate the conversion cost to each model based on number of units assembled.

Calculation of cost per unit (Amounts in $)

	Financial 5	Scientific 6	Total
a) Number of Units	11,000	44,000	55,000
b) Ratio for allocation of conversion cost	(11/55) or 1/5	(44/55) or 4/5
c) Direct Labor cost allocated (in the ratio 1:4)	13,640	54,560	68,200
d) Indirect materials allocated (in the ratio 1:4)	3,850	15,400	19,250
e) Overhead allocated (in the ratio 1:4)	15,510	62,040	77,550
f) Total conversion cost allocated (c+d+e)	33,000	132,000	165,000
g) Conversion cost per unit (f/a)	3	3
h) Parts cost per unit	25	30
Total cost per unit (g+h)	28	33

Therefore the cost per unit of the Financial 5 and Scientific 6 models for August is $28 and $33 respectively.