Brokia Electronics manufactures three cell phone models, which differ only in the components included: Basic, Photo, and UrLife. Production takes place in two departments, Assembly and Special Packaging. The Basic and Photo models are complete after Assembly. The UrLife model goes from Assembly to Special Packaging and is completed there. Data for July are shown in the following table. Conversion costs are allocated based on the number of units produced. There are no work-in-process inventories. Total Basic Photo UrLife
(20,000 units) (20,000 units) (10,000 units)
Materials $2,300,000 $486,000 $1,206,000 $608,000
Conversion costs:
Assembly $2,164,300
Special
Packaging 606,000
Total conversion
costs $2,770,300
A. What is the cost per unit transferred to finished goods inventory for each of the three phones in July?
B. The UrLife model is sold only to the government on a cost-plus basis. The marketing vice president suggests that conversion costs in Assembly could be allocated on the basis of material costs so he can offer a lower price for the Basic model. What cost would be reported for the three models if the marketing vice president's suggestion is adopted?