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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 19
CYCLE TIME AND CONVERSION COST PER UNIT
The theoretical cycle time for a product is 72 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are $6,480,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.5 unit of the product per hour. Suppose also that production incentives exist to minimize unit product costs.
Required:
1. Compute the theoretical conversion cost per unit.
2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product).
3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
The theoretical cycle time for a product is 72 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are $6,480,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.5 unit of the product per hour. Suppose also that production incentives exist to minimize unit product costs.
Required:
1. Compute the theoretical conversion cost per unit.
2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product).
3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Explanation
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1.
Computation of the theoretical conve...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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