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Lager Ltd.’s production volume and per unit information for the year is given below: Per unit...

Lager Ltd.’s production volume and per unit information for the year is given below:

Per unit information:

Direct labour

$15

Direct material

12

Applied manufacturing overhead

5

Unit production (budget)

23046

Unit production (actual)

32427

For Lager’s total units produced this year, how much were the conversion costs?

Select one:

a. $1037664

b. $648540

c. $460920

d. $875529

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Answer #1
Solution:
Answer is b. $648,540
Working Notes:
Conversion Costs = Direct Labor + Manufacturing Overheads
Cost is incurred for units produced during the year not for budgeted unit for the year.
Actual units produced during the year = 32,427
Conversion Costs per unit = Direct Labor + Manufacturing Overheads
Conversion Costs per unit = $15 + $5
Conversion Costs per unit = $20
Conversion cost = Total units produced during the year x conversion cost per unit
Conversion cost = 32,427 x $20
Conversion cost = $648,540
Please feel free to ask if anything about above solution in comment section of the question.
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