2) 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: 2017 2018 Units of L800 produced and sold 33,000 37,950 Selling price S370 $355 Direct materials (square feet) 98,000 95,000 Direct material costs per square foot $34 $35 Manufacturing capacity for L800 (units) 41,250 39,650 Total conversion costs $948,750 $911,950 Conversion costs per unit of capacity $23 $23
2) 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: 2017 2018 Units of L800 produced and sold 33,000 37,950 Selling price S370 $355 Direct materials (square feet) 98,000 95,000 Direct material costs per square foot $34 $35 Manufacturing capacity for L800 (units) 41,250 39,650 Total conversion costs $948,750 $911,950 Conversion costs per unit of capacity $23 $23
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:2) 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:
2017
2018
Units of L800 produced and sold
33,000
37,950
Selling price
$370
$355
Direct materials (square feet)
98,000
95,000
Direct material costs per square foot
$34
$35
Manufacturing capacity for L800 (units)
41,250
39,650
Total conversion costs
$948,750
$911,950
Conversion costs per unit of capacity
$23
$23
What is the cost effect of the growth component for direct materials?
2)
A) S1,831,500F
B) $499,800 U
C) S499,800 F
D) $1,831,500 U
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