Europe Electronics SNC manufactures microchips in large quantities. Each microchip undergoes assembly and testing. The total assembly costs during January 2015 were:
Direct materials used............................€720 000
Conversion costs...................................760 000
Total manufacturing costs.....................€1 480 000
Required
1. Assume there was no opening stock on 1 January 2015. During January, 10 000 microchips were placed into production and all 10 000 microchips were fully completed at the end of January. What is the unit cost of an assembled microchip in January 2015?
2. Assume that during February 10 000 microchips were placed into production. Further assume the same total assembly costs for January are also incurred in February, but only 9000 microchips are fully completed at the end of February. All direct materials had been added to the remaining 1000 microchips. However, on average, these remaining 1000 microchips were only 50% complete as to conversion costs. (a) What are the equivalent units for direct materials and conversion costs and their respective equivalent unit costs for February? (b) What is the unit cost of an assembled microchip in February?
3. Explain the difference in your answers to requirements 1 and 2.