Hmm.147. Coastal Cycles makes three models of electric bicycles: E20, E35, and E60. The models differ by the size of the battery andthe quality of the components. The bicycles are produced in two departments. The Assembly Department purchasescomponents from vendors and assembles them into bicycles. The models E20 and E35 are complete and ready for saleafter completing the assembly process. The model E60 undergoes further process in Customization Department, which isactually 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 unitsproduced. There are never any work-in-process inventories. Data for production in November are shown in the followingtable.UnitsproducedMaterials cost $ 10,425,000ConversioncostsAssemblyCustomizationTotalTotalconversioncosts7,0009,382,5001,417,500$ 10,800,000E20$3,0004,050,000E35E602,5001,500$ 2,325,000 $ 4,050,000The marketing manager cannot believe that the Controller wants to treat all bicycles the same. He says that in order tounderstand where to target marketing resources, he needs to understand the profitability (and therefore the costs) of theindividual models. He suggests treating the individual models as "jobs" using job costing to calculate the costs of theindividual models. He also suggested, based on what he remembered from his cost accounting course, that theconversion costs should be applied to the jobs based on direct material costs.Required:a. Suppose the marketing manager's suggestion is followed. What will be the unit cost of a bike produced in November?

Lets understand the basics. For Computing Cost of Production of the product, costs directly…

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 Units produced Materials cost $ 10,425,000 $ 7,000 3,000 4,050,000 E35 E60 2,500 1,500 $ 2,325,000 $ 4,050,000

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 Units produced Materials cost $ 10,425,000 $ 7,000 3,000 4,050,000 E35 E60 2,500 1,500 $ 2,325,000 $ 4,050,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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