Answer the following questions using the information below:
Argon Corp. had capacity to produce 15,000 units of L3 using 30,000 kg of direct materials. Argon produced 14,750 units of L3 by processing 27,500 kg of direct materials. Conversion cost per unit is $7.50. Argon can add or reduce manufacturing capacity in increments of 2,500 kgs.
-What would be the cost savings if Argon decides to reduce manufacturing capacity by 2,500 kgs?

Question

Quizplus · Accepted Answer

The cost savings would be $9,375 because Argon would be able to reduce its conversion costs by $7.50 per unit for the 2,500 units that it would no longer be producing.

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