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In: Accounting

Please make an example of converison cost "what was conversion cost per unit example by steps"...

Please make an example of converison cost

"what was conversion cost per unit example by steps"

Please show step by step

Expert Solution

Conversion costs - These costs generally are the combination of direct labor and the manufacturing overheads. In other words all the costs excluding the cost of raw materials are conversion costs.

Examples of conversion costs:

a. Direct labor and other related benefits

b. Depreciation on equipment

c. Factory rent

d. Maintenance expenses

Conversion cost per unit

Example to show the computation of conversion cost per unit.

Completed units = 10,000

Direct wages = $ 12,000

Indirect wages = $ 15,000

Direct material = $ 5,000

Indirect material = $ 2,000

Equipment depreciation = $6,200

Factory rent = $ 2,000

Solution: Factory overhead = Indirect wages + Indirect material + Depreciation + Factory rent

= $ 15,000 + $ 2,000 + $ 6,200 + $ 2,000

= $ 25,200

Conversion costs = Direct labor + Factory overheads

= $ 12,000 + $ 25,200

= $ 37,200

Conversion cost per unit = Conversion costs / Units

= $37,200 / 10,000

= $3.72 per unit

Therefore, the conversion costs per unit is $3.72.

ekkarill92 answered 2 years ago

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