Question
27. Clark Company makes a household appliance with model number XX300. The goal for 20x4 is to reduce direct materials usage per unit. No defective
27. Clark Company makes a household appliance with model number XX300. The goal for 20x4 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of XX300 units that can be produced. The industry market size for appliances increased by 5% from 20x3 to 20x4. The following additional data are available for 20x3 and 20x4: 20x3 20x4 Units of XX300 produced and sold 10,000 10,500 Selling price $100 $95 Direct materials (square feet) 30,000 29,000 Direct material costs per square foot $10 $11 Manufacturing capacity for XX300 (units) 12,500 12,000 Total conversion costs $250,000 $240,000 Conversion costs per unit of capacity $20 $20 What is the cost effect of the growth component for conversion costs?
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