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operation costing ferdon watches inc makes four models of watches gag gift commuter 691101

Operation Costing

Ferdon Watches, Inc., makes four models of watches, Gag Gift, Commuter, Sport, and Retirement. Ferdon manufactures the watches in four departments: Assembly, Polishing, Special Finishing, and Packaging. All four models are started in Assembly where all material is assembled. The Gag Gift is transferred to Packaging, where it is packaged and transferred to finished goods inventory. The Commuter and Sport are assembled, then transferred to Polishing. Once the polishing process is completed, they are transferred to Packaging and then finished goods. The Retirement model is assembled and then transferred to Special Finishing, and then Packaging. When packaged, it is transferred to finished goods.

Data for October are shown in the following table. Conversion costs are allocated based on the number of units processed in each department.

   

Gag Gift

Commuter

Sport

Retirement

 

Total

(5,000 units)

(10,000 units)

(13,000 units)

(2,000 units)

Conversion costs:

         

Assembly

$120,000

$15,000

$90,000

$156,000

$60,000

Polishing

69,000

       

Special Finishing

20,000

       

Packaging

90000

       

Total conversion

         

costs

$299,000

       

a. Draw the flow of the different models through the production process.

b. What is the cost per unit transferred to finished goods inventory for each of the four watches in October?

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