Reference no: EM131625715

Problem - Perfect Pad manufactures floor mats for trailers that are used to transport horses. The mats provide for a firm footing surface that quickly sheds water. Mats are made to customer specifications via orders submitted over an internet site. The mats are completed and shipped in about one day. As a result, Perfect Pad does not maintain any work in process or finished goods inventory.

The following costs were incurred in producing and selling mats during August:

Synthetic rubber used in the mat                          $134,300

Lubricant used in the molding machine                  14,000

Factory rent                                                        9,600

Electricity to run the molding machine                   2,600

Labor cost of machine operators                           34,100

Internet sales site                                               1,500

Administrative salaries                                        12,500

Depreciation of molding machine                          7,400

Salary of factory safety inspector                         3,500

Office rent                                                          13,500

Evaluate these costs, and determine the amount of direct material, direct labor, factory overhead, and selling/general/administrative costs. Next, identify how much is considered to be a "prime cost" and how much is considered to be a "conversion cost."