Silverman Company has a lean manufacturing system in place. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of guns, has four operations: machining, finishing, assembly, and qualifying (testing). The machining process is automated, using computers. In this process, the gun's frame, slide, and barrel are constructed. In finishing, sandblasting, buffing, and bluing are done. In assembly, the three parts of the gun are assembled along with the grip, the sight, the label, the magazine, and the clip. Finally, each firearm is tested using 20 rounds of ammunition. For the coming year, the firearm cell has the following budgeted costs and cell time (both at theoretical capacity): Budgeted conversion costs $2,500,000 Budgeted raw materials $3,000,000 Cell time 4,000 hours Theoretical output 30,000 guns During the year, the following actual results were obtained: Actual conversion costs $2,500,000 Actual materials $2,600,000 Actual cell time 4,000 hours Actual output 25,000 guns