At the beginning of the current year,Peters Company installed a JIT purchasing and manufacturing system.The following information has been gathered about one of the company's products: $$\begin{array} { l r }
\text { Theoretical annal capacity } & 2,000 \
\text { Actual production } & 1,800 \
\text { Production hours available } & 500 \
\text { Actual conversion cost per hour } & \$ 7
\end{array}$$
- What is the ideal conversion cost per unit?
A)$0.9 per unit.
B)$1.75 per unit.
C)$25.50 per unit.
D)$28 per unit.

Question

At the beginning of the current year,Peters Company installed a JIT purchasing and manufacturing system.The following information has been gathered about one of the company's products: $$\begin{array} { l r } 
\text { Theoretical annal capacity } & 2,000 \
\text { Actual production } & 1,800 \
\text { Production hours available } & 500 \
\text { Actual conversion cost per hour } & \$ 7
\end{array}$$
- What is the ideal conversion cost per unit?
A)$0.9 per unit.
B)$1.75 per unit.
C)$25.50 per unit.
D)$28 per unit.

Quizplus · Accepted Answer

To calculate the conversion cost per unit, we need to add up the direct labor and overhead costs per unit. From the information given, the direct labor cost per unit is $1.25 and the overhead cost per unit is $0.50. Therefore, the conversion cost per unit is $1.75 (direct labor cost + overhead cost). Choice B is the correct answer.

At the Beginning of the Current Year,Peters Company Installed a JIT