roblem 2: Assume that a company has the following data for one of its manufacturing cells: Theoretical velocity: 40 units per hour Productive minutes available (per year): 1,200,000 Annual conversion costs: $4,800,000 Actual velocity: 30 units per hour Required: 1. Calculate the actual conversion cost per unit using actual cycle time and the standard cost per minute. 2. Calculate the ideal conversion cost per unit using theoretical cycle time and the standard cost per minute. What incentive exists for managers when cycle time costing is used? 3. What if the actual velocity is 36 units per hour? What is the conversion cost per
Problem 2:
Assume that a company has the following data for one of its manufacturing cells:
Theoretical velocity: 40 units per hour
Productive minutes available (per year): 1,200,000
Annual conversion costs: $4,800,000
Actual velocity: 30 units per hour
Required:
1. Calculate the actual conversion cost per unit using actual cycle time and the standard
cost per minute.
2. Calculate the ideal conversion cost per unit using theoretical cycle time and the standard
cost per minute. What incentive exists for managers when cycle time costing is used?
3. What if the actual velocity is 36 units per hour? What is the conversion cost per
unit? What effect will this improvement have on delivery performance?
Cheat Notes :
Cycle time (time/units produced)
velocity (units produced/time)
Step by step
Solved in 3 steps
