Howrley-David, Inc., manufactures two models of motorcycles: the Fatboy and the Screamer. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is the cost of materials. The following data are available for August: Fatboy Screamer Total Number of units assembled 2,000 4,000 6,000 Materials cost per unit $ 2,000 $ 3,000 Other costs: Direct labor $ 6,000,000 Indirect materials 1,800,000 Other overhead 4,200,000
Howrley-David uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in August.

The cost of each model assembled in August is $4,000 for Fatboy and $5,000 for Screamer.

Data and Calculations:

                                                       Fatboy            Screamer   Total

Total Number of units assembled 2,000               4,000      6,000

Materials cost per unit                $ 2,000            $ 3,000

Total materials costs           $4,000,000    $12,000,000

Conversion costs:

Direct labor =                      $ 6,000,000

Indirect materials =              $1,800,000

Other overhead =               $4,200,000

Total conversion costs = $12,000,000

The conversion costs per unit = $2,000 ($12,000,000/6,000).

                                                       Fatboy            Screamer

Materials cost per unit                $ 2,000            $ 3,000

Conversion costs per unit          $ 2,000            $ 2,000

Total costs per unit                     $4,000             $5,000

Thus, the cost of each model assembled in August is $4,000 for Fatboy and $5,000 for Screamer.

Learn more about computing the cost per unit of a product here: link

Fatboy = $4,000

Screamer = $5,000

Explanation:

Particulars                         Amount  

Direct labor                       $6,000,000  

Indirect materials               $1,800,000  

Other overhead                $4,200,000  

Conversion costs                 $ 12,000,000  

Number of units assembled  6,000  

Operation cost per unit           2,000

Particulars                 Fatboy        Screamer            Total

Operation cost             $4,000,000     $8,000,000   $12,000,000

Fatboy = 2,000 × 2,000

Screamer = 4,000 × 2,000

Materials cost             $4,000,000     $12,000,000   $16,000,000

Fatboy= 2,000 × 2,000

Screamer = 4,000 × 3,000

Total cost              $8,000,000$20,000,000    $28,000,000

Number of units       2,000         4,000             6,000

Unit cost                $4,000          $5,000

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