Q.18-3SE - Horngren'S Financial And Managerial Accounting

Question

Question: Evergreen Orange manufactures orange juice. Last month’s total manufacturing costs for the Tampa operation included:

Direct materials	$450,000
Direct labor	32,000
Manufacturing overhead	125,000

What was the conversion cost for Evergreen Orange’s Tampa operation last month?

Step-by-Step Solution

Answer

Answer:

The conversion cost for evergreen orange’s tampa operation is $157,000

Step 1: Conversion cost

Conversion cost means the cost incurred by the company for converting the raw materials into the finished goods. It is the sum total of the direct labor and the other manufacturing overhead.

Step 2: Conversion cost

$$\begin{gathered} \mathit{C}\mathit{o}\mathit{n}\mathit{v}\mathit{e}\mathit{r}\mathit{s}\mathit{i}\mathit{o}\mathit{n}\mathbf{ }\mathbf{cos}\mathit{t}\mathbf{ }\mathbf{=}\mathit{D}\mathit{i}\mathit{r}\mathit{e}\mathit{c}\mathit{t}\mathbf{ }\mathit{l}\mathit{a}\mathit{b}\mathit{o}\mathit{u}\mathit{r}\mathbf{ }\mathbf{+}\mathit{M}\mathit{a}\mathit{n}\mathit{u}\mathit{f}\mathit{a}\mathit{c}\mathit{t}\mathit{u}\mathit{r}\mathit{i}\mathit{n}\mathit{g}\mathbf{ }\mathit{O}\mathit{v}\mathit{e}\mathit{r}\mathit{h}\mathit{e}\mathit{a}\mathit{d} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{ }\mathbf{\$}\mathbf{32}\mathbf{,}\mathbf{000}\mathbf{+}\mathbf{\$}\mathbf{125}\mathbf{,}\mathbf{000} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{157}\mathbf{,}\mathbf{000} \end{gathered}$$