Lager Ltds production volume and per unit information for th

Lager Ltd.’s production volume and per unit information for the year is given below: Per unit information: Direct labour $16 Direct material 11 Applied manufacturing overhead 4 Unit production (budget) 22863 Unit production (actual) 33883 For Lager’s total units produced this year, how much were the conversion costs? Select one:

a. $677660

b. $914841

c. $457260

d. $1050373

Solution

Direct labor costs

= Direct labor rate x Unit production (actual)

= $16 x 33,883

= $ 542,128

Manufacturing overhead applied

= Application rate x Unit production (actual)

= $4 x 33,883

= $135,532

So, conversion costs

= Direct labor costs + Manufacturing overhead applied

= $542,128 + $135,532

= $677,660

So, as per above calculations, option a is the correct option