Carola Industries, Inc., manufactures discs for several of the leading recording studios in the US and Europe. Department 60 is responsible for the electronic circuitry within each disc. Department 61 applies the plastic-like surface to the discs and packages them for shipment. Carola recently produced 4,000 discs for the Milo Company. In fulfilling this order, the departments incurred the following costs:
Department
60 61
Direct materials used $29,440 $3,920
Direct labor 6,800 2,560
Overhead 7,360 4,800
1. Compute the unit cost for each department. 2. Compute the total unit cost for the Milo Company order. 3. The selling price for this order was $14 per unit. Was the selling price adequate? List the assumptions and/or computations upon which you based your answer. What suggestions would you make to Carola Industries' management about the pricing of future orders? 4. Compute the prime costs and conversion costs per unit for each department.