Question

Cycle Time and Velocity

Norton Company has the following data for one of its production departments:

Theoretical velocity: 670 units per hour

Productive minutes available per year: 50,000,000

Annual conversion costs: $250,000,000

Actual velocity: 268 units per hour

Required:

1. Calculate the actual conversion cost per unit using actual cycle time and the standard cost per minute. Round your actual cycle time answer to three decimal places and your cost per unit answer to the nearest cent.

Actual cycle time		minutes per unit
Standard cost per minute	$	per minute
Conversion cost per unit	$	per unit

2. Calculate the ideal conversion cost per unit using theoretical cycle time and the standard cost per minute. If required, round your intermediate calculations and final answers to two decimal places.

Theoretical cycle time		minutes per unit
Conversion cost per unit	$	per unit

What incentive exists for managers when cycle time costing is used?

3. What if the actual velocity is 469 units per hour? What is the conversion cost per unit? If required, round your intermediate calculations and final answers to two decimal places.

Actual cycle time		minutes per unit
Conversion cost per unit	$	per unit

Answer 1