Question

Mahogany Corp. manufactures detergent bars. The budgeted conversion costs for its blending operation are $640,000 (consisting of items such as direct labor, depreciation, and power), and the practical capacity of the operation is 160,000 machine hours. The conversion rate is?

Answer 1

The conversion rate for Mahogany Corp.'s blending operation is $4 per machine hour.

Step-by-step explanation:

The conversion rate can be calculated by dividing the budgeted conversion costs by the practical capacity of the blending operation.

In this case, the budgeted conversion costs are $640,000 and the practical capacity is 160,000 machine hours. So, the conversion rate is $640,000 / 160,000 machine hours = $4 per machine hour.

The student is asking about the conversion rate at Mahogany Corp. for their detergent bar manufacturing operation. To calculate the conversion rate, we divide the budgeted conversion costs by the practical capacity of machine hours. With budgeted costs of $640,000 and a capacity of 160,000 machine hours, the conversion rate is calculated as $640,000 ÷ 160,000 machine hours, which equals $4 per machine hour.