In 2017, Commodity Inc., processor of whole grain flour, had the capacity to produce 10,000,000 pounds of product at a conversion cost per pound of $0.20. The conversion cost per pound was $0.15 in 2016 (the previous year). The direct material cost per pound for both years was $0.07 per pound and in 2017, Commodity Inc. produced 9,300,000 pounds while actual production for the previous year was 8,600,000 pounds. What was the cost of unused capacity in 2017?
A) $280,000
B) $140,000
C) $105,000
D) $210,000

Question

Quizplus · Accepted Answer

(10,000,000 x 0.20) - (9,300,000 x 0.20) = $140,000