Norton Company has the following data for one of its production departments: Theoretical velocity: 300 units per hour Productive minutes available per year: 10,000,000 Annual conversion costs: $60,000,000 Actual velocity: 160 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 220 units per hour? What is the conversion cost per unit? What effect will this improvement have on delivery performance?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
BuyFind

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

Solutions

Chapter
Section
Chapter 13, Problem 1CE
Textbook Problem

Norton Company has the following data for one of its production departments:

Theoretical velocity: 300 units per hour

Productive minutes available per year: 10,000,000

Annual conversion costs: $60,000,000

Actual velocity: 160 units per hour

Required:

  1. 1. Calculate the actual conversion cost per unit using actual cycle time and the standard cost per minute.
  2. 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. 3. What if the actual velocity is 220 units per hour? What is the conversion cost per unit? What effect will this improvement have on delivery performance?

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Chapter 13 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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