Question

If the costs for direct materials, direct labor, and factory overhead were $522,200, $82,700, and $45,300, respectively, for 16,000 equivalent units of production, the conversion cost per equivalent unit was $8.00.

True or False

Answer 1

Answer:

True

Explanation:

Conversion costs in this scenario consists of direct labor costs and factory overhead cost which total $128,000 ($82700+$45300).

However conversion cost per unit is total conversion costs divided by equivalent units of 16,000

Conversion cost per unit =$128,000/16000

                                          =$8 per unit

This goes to show that the statement that the conversion per unit was $8 is true.

The direct material costs is not included as the conversion costs only include costs incurred in converting raw materials to finished products.