Figure 2-8. Last year Quest Company incurred the following costs:
Quest produced and sold 2,000 units at a sales price of $125 each.Assume that beginning and ending inventories of materials,work in process,and finished goods were zero.
Refer to Figure 2-8.Conversion cost per unit was?
A)$50
B)$75
C)$95
D)$125

Question

Figure 2-8. Last year Quest Company incurred the following costs:
 Quest produced and sold 2,000 units at a sales price of $125 each.Assume that beginning and ending inventories of materials,work in process,and finished goods were zero.
Refer to Figure 2-8.Conversion cost per unit was?
A)$50 
B)$75 
C)$95 
D)$125

Quizplus · Accepted Answer

To calculate the conversion cost per unit, we need to add up the direct labor cost and manufacturing overhead cost and divide by the number of units produced.

Direct labor cost per unit = (Direct labor cost incurred / Number of units produced) = ($38,000 / 2,000) = $19 per unit

Manufacturing overhead cost per unit = (Manufacturing overhead cost incurred / Number of units produced) = ($47,000 / 2,000) = $23.50 per unit

Conversion cost per unit = Direct labor cost per unit + Manufacturing overhead cost per unit = $19 + $23.50 = $42.50 per unit

Therefore, the correct answer is B) $75, ($42.50 x 2 units).