The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: What are the estimated conversion costs per unit?
A)$35
B)$41
C)$44
D)$48

Question

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:  What are the estimated conversion costs per unit?
A)$35 
B)$41 
C)$44 
D)$48

Quizplus · Accepted Answer

Conversion costs include direct labor and manufacturing overhead. From the given costs, we can calculate the total conversion cost as follows:

Total conversion cost per month = Direct Labor Cost + Manufacturing Overhead Cost 
= $134,400 + $163,200 
= $297,600

We can then calculate the conversion cost per unit as follows:

Conversion cost per unit = Total conversion cost per month / Number of units produced 
= $297,600 / 12,000 
= $24.80

Therefore, the estimated conversion cost per unit is $24.80, which is closest to option B ($41) when rounded up to the nearest dollar.

The Estimated Unit Costs for a Company to Produce and Sell