Question

1. Which of the following is NOT an engineered​ cost?

a. the cost of direct laborers who work in the factory

b. direct material cost of a major component of the product

c. advertising costs for a new product that the factory will start producing

d. depreciation of all factory tools

BarGraphs Corp. had capacity to produce​ 12,000 units of L3 using​ 30,000 kg of direct materials. BarGraphs produced​ 11,650 units of L3 by processing​ 25,500 kg of direct materials. Conversion cost per unit is​ $7.50. BarGraphs can add or reduce manufacturing capacity in increments of​ 4,500 kgs.

What is the cost of unused capacity for conversion costs of BarGraphs​ ?

A. ​$3,000

B.​$4,500

C.​$2,625

D.​$13,500

Answer 1

1.c. advertising cost of a major component of the product

Engineered costs are those which vary with number of units produced.

Advertising costs do not vary with number of units produced.

Whereas, cost of direct labourers, direct materials, depreciation depend on units produced.

2.D.$13,500.

first let us know the cost kgs per unit =>30,000 kgs / 12,000 capacity

=>2.50 per kg.

conversion cost per kg = $7.50 / 2.50

=>$3.00 per kg.

unused capacity conversion cost = $3.00 (30,000 - 25,500kgs)

=>$13,500 .