Sifton Electronics Corporation manufactures and assembles electronic motor drive

Question

Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates only to one customer's lean cell for the coming year. Projected labor and overhead, $7,370,000; materials costs, $28 per unit. Planned production included 4,000 hours to produce 27,500 motor drives. Actual production for August was 1,600 units, and motor drives shipped amounted to 1,380 units.

From the foregoing information, determine the amount of the conversion costs charged to Raw and In Process Inventory during August.

a.$369,840

b.$428,800

c.$473,600

d.$408,480

Explanation / Answer

Labor and overhead cost per unit = Projected labor and overhead/Planned production

= $7,370,000/27,500 motor drives = $268 per unit (i.e. conversion cost per unit)

Conversion cost charged to raw and in process inventory = Units shippped*Conversion cost per unit

= 1,380 units*$268 per unit = $369,840

Therefore the correct option is a) $369,840.

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