The company assembles the motor drives for several accounts

The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates only to one customer\'s lean cell for the coming year. Projected labor and overhead, $6,195,300; materials costs, $30 per unit. Planned production included 6,176 hours to produce 19,300 motor drives. Actual production for August was 1,870 units, and motor drives shipped amounted to 1,480 units.

From the foregoing information, determine the amount of the conversion costs charged to Raw and In Process Inventory during August.

a.$600,270

b.$602,170

c.$243,684

d.$125,190

Solution

Conversion cost per hour = 6195300/19300 = 321 per motor drives :

Conversion cost charged to raw and in process inventory = (1870-1480)*321 = $125190

So answer is d) $125190