At the beginning of 2018, Terrapin Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company's products: $\begin{array}{lr}
\text { Theoretical annual capacity } & 3,500 \
\text { Actual production } & 1,800 \
\text { Production hours available } & 700 \
\text { Actual conversi on cost per hour } & \$ 10
\end{array}$ What is the ideal conversion cost per unit?
A)$1.02 per unit.
B)$29.10 per unit.
C)$2.00 per unit.
D)$32 per unit.

Question

Quizplus · Accepted Answer

The ideal conversion cost per unit is calculated by dividing the total conversion costs by the theoretical annual capacity. The total conversion costs are found by multiplying the production hours available by the actual conversion cost per hour: $700 \times \$10 = \$7,000$. Then, divide this by the theoretical annual capacity: $\$7,000 / 3,500 = \$2.00$ per unit.

At the Beginning of 2018, Terrapin Company Installed a JIT