Question

The estimated unit cost for CNR Inc. when its operating at a production and sales level of 12,000 units, are as follows: Cost Item Estimated Unit Cost Direct Materials $32 Direct Labor Variable factory overhead Fixed Factory overhead Variable marketing Fixed marketing Required: a identify the estimated conversion cost per unit. b. Identify the estimated prime cost per unit c. Determine the estimated total variable cost per unit. d. Compute the total cost that would be incurred during a month with a production level of 12,000 units and sales level of $8,000 units. in wou

Answer 1

Conversion cost is the cost used to convert the raw material into finished goods. it includes the direct labor and manufacturing cost. The prime cost is the sum total of direct material,direct labor and direct manufacturing expenses.

a) The estimated conversion cost per unit is calculated below : 20 conversion cost per unit : unit cost ($) Direct Laboy 002 00 10 Variable factory overhead 15 Fixed factay overheads conversion cost per unit. estimated conversion cost per unit a $3 * Estimated friine cost per unit is calculated below - Prime cost o Tontcost ($) Raw material (Direct) 32 Direct Laboy 42 prime cast per uit prime ust per unit $42 O Estimated to tal variable cost per unit is calculated below: Total variable cost unit cost ($ Direct Materials 32 Direct Labox 10 Variable Factory overhead 15 Variable marketing 100 Total variable cost pex unit

d The total cost incurred during a month is calculated below: production = 12000 units adone drog sale ei = 8000 units owo particular lozit cost/$) Direct materials 32 Direct Labor 10 Prime cost 42 Variable factory overhead Fixed factory overbead Work cost Variable Marketing Fixed Marketinq Amount is unit cost all cost of production 1852,000 1 (12000 coilts $71) Add: Fi rished goods begining Iless: Finished goods ending 284,000 (12000 units - 8000 units) x$71. Total cost of cale biu1568 ooo I 71 71 Total cost of sale $568 ooo