BarGraphs Corp. had capacity to produce 12,000 units of L3 using 30,000 kg of direct materials. BarGraphs produced 11,650 units of L3 by processing 25,500 kg of direct materials. Conversion cost per unit is $7.50. BarGraphs can add or reduce manufacturing capacity in increments of 4500 kgs.
What is the cost of unused capacity for conversion costs of BarGraphs?

Question

Quizplus · Accepted Answer

Conversion costs per kg of direct material = $7.50 / (30,000/12,000) = $3.00 per kg
Cost of unused capacity for conversion costs = (30,000 kgs × $3.00) - (25,500 kgs × $3.00) = $13,500