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 900 1,800 2,700 Materials cost per unit $ 2,600 $ 3,600 Other costs: Direct labor $ 2,430,000 Indirect materials 405,000 Other overhead 1,215,000 Required: 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.

Unit of Fatboy is $4100

unit cost of Screamer is $5100

Total cost Fatboy is $3,690,000

Total cost of Screamer is $9,180,000

Explanation:

                                           Fatboy          Screamer        Calculation

Volume of production      900                1800              2700

Material cost per unit      $2,600              $3,600

Direct labor cost              $900                 $900         $2,430,000/2700=$900

Indirect material               $150                   $150          $405,000/2700=$150

Other overhead                $450                  $450        $1,215,000/2700=$450

Total cost per unit            $4100                 $5,100

Total cost of each model:

Fatboy ($4,100*900)=$3,690,000

Screamer=($5100*1800)=$9,180,000

Alternatively

total conversion costs=$2430000+$405000+$1215000/2700

                                  =$4,050,000/2700

                                  =$1500 per unit

total cost of Fatboy=($2600+$1500)*900=$3,690,000

total cost of Screamer=($3600+$1500)*1800=$9,180,000

the correct answer is:     [c]:     " cyclical unemployment " .