Bemidii Company has the following data for one of its production departments:

Theoretical velocity: $400$ units per hour

Productive minutes available per year: $5,000,000$

Annual conversion costs: $$120,000,000$

Actual velocity: $240$ units per hour

REQUIRED:

Calculate the actual conversion cost per unit using actual cycle time and the standard cost per minute.

Calculate the ideal conversion cost per unit using theoretical cycle time and the standard cost per minute. What incentive exists for managers when cycle time costing is used?

What if the actual velocity is $300$ units per hour? What is the conversion cost per unit? What effect will this improvement have on delivery performance?