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Assume that a value stream in Elite Company has two products with material costs of $40,000 and $80,000 for a given week. The conversion costs for the week amounted to $360,000. The units produced for the first product are 21,000 with 20,000 shipped to customers. For the second product, 40,000 units were produced and shipped. Calculate the cost per unit for the first product. (Note: Round to two decimal places.)

a. $9.00 per unit
b. $3.00 per unit
c. $8.00 per unit
d. $6.00 per unit

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Answer:

c. $8.00 per unit

Explanation:

Total Cost = Conversion Cost + Material Cost

Total Cost = $360,000 + ($40,000 + $80,000)

Total Cost = $480,000

Total Units = Product 1 units shipped + Product 2 units shipped

Total Units = 20,000 + 40,000

Total Units = 60,000

Cost per unit of 1st product can be calculated as follows;

Cost per unit = Total Cost / Total Units

Cost Per Unit = $480,000 / 60,000

Cost Per Unit = $8.00 per unit

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