Compute the theoretical conversion cost per unit

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Reference no: EM13947814

The theoretical cycle time for a product is 15 minutes per unit. The budgeted conver- sion costs for the manufacturing cell are $1,350,000 per year. The total labor minutes available are 300,000. During the year, the cell was able to produce three units of the product per hour. Suppose also that production incentives exist to minimize unit product costs.

Required

1. Compute the theoretical conversion cost per unit.

2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product).

3. Discuss how this approach to assigning conversion costs can improve delivery time performance.

Reference no: EM13947814

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