Cycle Time and Velocity

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

Theoretical velocity: 160 units per hour

Productive minutes available per year: 13,000,000

Annual conversion costs: $104,000,000

Actual velocity: 80 units per hour

Required:

1. Calculate the actual conversion cost per unit using actual cycle time and the standard cost per minute. Round your actual cycle time answer to three decimal places and your cost per unit answer to the nearest cent.

Actual cycle time	____________	minutes per unit
Standard cost per minute	____________	per minute
Conversion cost per unit	____________	per unit

2. Calculate the ideal conversion cost per unit using theoretical cycle time and the standard cost per minute. If required, round your intermediate calculations and final answers to two decimal places.

Theoretical cycle time	_____________	minutes per unit
Conversion cost per unit	_____________	per unit

What incentive exists for managers when cycle time costing is used?

3. What if the actual velocity is 112 units per hour? What is the conversion cost per unit? If required, round your intermediate calculations and final answers to two decimal places.

Actual cycle time	____________	minutes per unit
Conversion cost per unit	____________	per unit