27) Trusted Products Company makes a household appliance with model number L800. The goal for
2018 is to reduce direct materials usage per unit. No defective units are currently produced.
Manufacturing conversion costs depend on production capacity defined in terms of L800 units that
can be produced. The industry market size for appliances increased 15% from 2017 to 2018. The
following additional data are available for 2017 and 2018:
27)
Units of L800 produced and sold
Selling price
Direct materials (square feet)
Direct material costs per square foot
Manufacturing capacity for L800 (units)
Total conversion costs
Conversion costs per unit of capacity
What is the cost effect of the growth component for conversion costs?
A) $40,000 U
B) $1600 U
C) $40,000 F
D) $0
2017
40,000
$320
99,000
$34
50,000
$1,210,000
$25
2018
46,000
$300
97,500
$36
48,400
$1,250,000
$25