5-28 Equivalent units, zero beginning inventory

Quon Ltd is a manufacturer of digital cameras. It has two departments: Assembly and Testing. In January 2014 the company incurred $750 000 on direct materials and $798 000 on conversion costs in the Assembly Department, for a total cost of $1 548 000.

1) Assume there was no beginning inventory of any kind on 1 January 2014. During January, 10 000 cameras were placed into assembly and all 10 000 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 10 000 cameras are placed into assembly. Further assume the same total assembly costs for January are also incurred in February, but only 9000 cameras are fully completed at the end of the month. All direct materials have been added to the remaining 1000 cameras. However, on average, these remaining 1000 cameras are only 50% 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.