Question

Jackson Products
Schedule of Cost of Goods Manufactured
For the Year Ended December 31 (in thousands)
Direct materials:
Beginning inventory	$17,000
Purchases of direct materials	70,000
Cost of direct materials available for use	$87,000
Ending inventory	(9,000)
Direct materials used		$  78,000
Direct manufacturing labor		9,000
Indirect manufacturing costs:
Indirect manufacturing labor	$  8,000
Supplies	1,000
Heat, light, and power	4,000
Depreciation -- plant building	2,000
Depreciation -- plant equipment	3,000
Miscellaneous	2,000	20,000
Manufacturing costs incurred during the period		$107,000
Add: Beginning work-in-process inventory		11,000
Total manufacturing costs to account for		$118,000
Minus: Ending work-in-process inventory		(7,000)
Cost of goods manufactured (to Income Statement)		$111,000

What are Jackson’s conversion costs for the year?

a) $4,000

b) $29,000

c) $20,000

d) $98,000

Answer 1

Correct answer is: b) $29,000
Computation of Jackson's conversion cost for the year:
Direct manufacturing labor	=	$   9,000
Total manufacturing overheads	=	$ 20,000
Total Conversion cost	=	$ 29,000