Question

The following cost information has been provided for a new product line.                               

  1. The following cost information has been provided for a new product line.

                                                   Cost per unit

  • Direct materials                 $2.5
  • Direct labour                      $1.5
  • Variable factory overhead           $ 3
  • Fixed factory overhead                $1.5

The unit costs are based on a production of 10000 units.

If 2000 units are produced what would be the:

  1. Total prime cost
  2. Conversion cost per unit
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Homework Answers

Answer #1

Total prime cost = $8000

Conversion cost per unit = $ 12

Working

Direct material (2.5 x 2000) $      5,000.00
Direct labor (1.5 x 2000) $      3,000.00
Total prime cost $      8,000.00

.

Direct labor per unit $              1.50
Variable factory overhead $              3.00
Fixed factory overhead per unit [(1.5*10000)/2000] $              7.50
Conversion cost per unit $            12.00
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