Answer:
1. Prime cost is $107,325
2. Conversion cost is $244,400
3. Product cost is $276,525
4. Period cost is $53,350
5. Material cost per unit is $43.04
6. Conversion cost per unit is $38.04
Explanation:
1. PRIME COST is the cost incurred by the company directly related to the production of goods. To compute the prime cost, let’s just simply add the direct material and the direct labor costs.
Direct material $32,125
+
Direct labor ($23.50 x 3,200 hrs) $75,200
= $107,325
2. CONVERSION COST is the expenses incurred by the company in turning their raw materials into finished goods. Formula of it is Direct labor + Manufacturing overhead.
Direct labor ($23.50 x 3,200 hrs) $75,200
+
Manufacturing overhead (75,200 x 225%) 169,200
= $244,400
3. PRODUCT COST is the combination of costs recorded in the inventory. It is usually the cost recognized as the cost of goods sold. This consist of the direct materials plus direct labor plus manufacturing overhead.
Product cost = DM + DL + MOH
= $32,125 + 75,200 + 169,200
= $276,525
4. PERIOD COST is the combination of Administrative expenses and the selling expenses.
Period cost = AE + SE
= $22,225 + $31,125
= $53,350
5. Material cost per unit is computed by using the formula:
= (DM + DL + MOH) / units produced
= ($32,125 + $75,200 + $169,200) / 6,425
= $43.04
6. Conversion cost is derived by dividing conversion cost over the units produced.
Conversion cost / units produced
= $244,400 / 6,425
= $38.04
