Question

Coastal Cycles makes three models of electric bicycles: E20, E35, and E60. The models differ by the size of the battery and the quality of the components. The bicycles are produced in two departments. The Assembly Department purchases components from vendors and assembles them into bicycles. The models E20 and E35 are complete and ready for sale after completing the assembly process. The model E60 undergoes further process in Customization Department, which is actually just a small area in the same building as the Assembly Department.

Conversion costs in both the Assembly Department and Customization Department are based on the number of units produced. There are never any work-in-process inventories. Data for production in November are shown in the following table.

		Total		E20			E35			E60
Units produced		12,400			4,800			4,300			3,300
Materials cost	$	9,126,400		$	2,400,000		$	3,066,400		$	3,660,000
Conversion costs
Assembly		8,170,200
Customization		795,000
Total conversion costs	$	8,965,200

The plant controller believes that keeping track of the three models and separating costs in the Assembly and Customization Departments is not worth the time and effort. She suggests not distinguishing between the three bike models, treating Assembly and Customization as a single department, and using process costing to develop product costs for the three bikes.

Required:

a. Suppose the Controller's suggestion is followed. What will be the unit cost of a bike produced in November?

  
Cost per unit=_________

Answer 1

Page. No o Answer Cost per unitat Total materials Total conversion costos = $9126400 cooks = $8965200 Total corsks incevered = Total materials costs of total Conversion costo - 9126400 + 8965200 = $18091600 Total units produced = 12400 units cost per unit = Total costs incurred Total units produced $18091600 12400 = $ 1459 I cost per unit - $ 1459)