Solutions to exercises
4.11
No opening stock.
(25 min)
1
Direct materials cost per unit (€720,000 ÷ 10,000)
€72 Conversion cost per unit (€760,000 ÷ 10,000)
76 Assembly Department cost per unit
€148
2
Solution Exhibit A calculates the equivalent units of direct materials and conversion costs in the Assembly Department of Europe Electronics SNC in February 2010. Solution Exhibit B calculates equivalent unit costs Direct materials cost per unit
€72 Conversion cost per unit
80 Assembly Department cost per unit
€152
3
The difference in the Assembly Department cost per unit calculated in requirements
1 and 2 arises because the costs incurred in January and February are the same but fewer equivalent units of work are done in February relative to January. In January, all 10,000 units introduced are fully completed resulting in 10,000 equivalent units of work done with respect to direct materials and conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units of work is done with respect to direct materials but only 9,500 equivalent units of work is done with respect to conversion costs. The Assembly Department cost per unit is therefore higher.
Solution Exhibit Ab Steps 1 and 2: Summarise output in physical units and calculate equivalent units, Assembly Department of Europe Electronics SNC for February 2010.
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