Answer the following questions using the information below:
Mitsufugi Company makes a kitchen appliance with model number KA450.The goal for 2018 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of KA450 units that can be produced.The industry market size for appliances increased 5% from 2017 to 2018.The following additional data are available for 2017 and 2018:
$$\begin{array} { l r r }
& 2017 & 2018 \
\text { Units of KA450 produced and sold } & 10000 & 10300 \
\text { Selling price } & \$ 150 & \$ 145 \
\text { Direct materials (square metres) } & 30000 & 29000 \
\text { Direct material costs per square metre } & \$ 12 & \$ 13 \
\text { Manufacturing capacity for KA450 (units) } & 12500 & 12000 \
\text { Total conversion costs } & \$ 250000 & \$ 240000 \
\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20
\end{array}$$
-What is the cost effect of the growth component for conversion costs?

Question

Answer the following questions using the information below:
Mitsufugi Company makes a kitchen appliance with model number KA450.The goal for 2018 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of KA450 units that can be produced.The industry market size for appliances increased 5% from 2017 to 2018.The following additional data are available for 2017 and 2018:
 $$\begin{array} { l r r } 
& 2017 & 2018 \
\text { Units of KA450 produced and sold } & 10000 & 10300 \
\text { Selling price } & \$ 150 & \$ 145 \
\text { Direct materials (square metres) } & 30000 & 29000 \
\text { Direct material costs per square metre } & \$ 12 & \$ 13 \
\text { Manufacturing capacity for KA450 (units) } & 12500 & 12000 \
\text { Total conversion costs } & \$ 250000 & \$ 240000 \
\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20
\end{array}$$
-What is the cost effect of the growth component for conversion costs?

Quizplus · Accepted Answer

The growth component for conversion costs refers to the increase in production costs due to an increase in production volume. The question does not provide any information on the level of production growth, but the answer choices suggest that there is either an unfavorable ($10,000 F) or favorable ($10,000 U, $12,500 U) cost effect. However, it is not clear whether these cost effects are related to the growth component or to other factors. As a result, it is not possible to determine the best choice with the information given. Option B suggests that there is no cost effect, which is the safest assumption to make in the absence of more information.

Answer the Following Questions Using the Information Below: Mitsufugi Company

Answer the Following Questions Using the Information Below:
Mitsufugi Company