Answer:
Option (D) is correct.
Explanation:
Variable overhead per pound:
= variable overheads ÷ pounds of products to be produced
= 1,200,000 ÷ 1,000,000
= 1.2
Direct labor hours = 20 workers × 175 hours
= 3,500
Direct labor cost = Direct labor hours × 24
= 3,500 × 24
= 84,000
Machine hours = 21,000
Fixed overhead = $3,500,000 per month
Labor related (40%) = 1,400,000 ÷ 3,500 hours
= 400
Machine related (60%) = 2,100,000 ÷ 21,000 hours
= 100
Total cost of conversion:
= Direct labor cost + Variable overheads + Fixed overheads
= Direct labor cost + Variable overheads + (Labor related + Machine related)
= 10 min(24 ÷ 60 min) + (100 × 1.2) + [(400 ÷ 60)× 10 + (100 ÷ 60)× 75]
= 4 + 120 + 66.66666667 + 125
= 315.66666667
