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:

a.$4 per machine hour.
b.$14 per machine hour.
c.$10 per machine hour.
d.$8 per machine hour.

Answer 1

To calculate the conversion rate for Mahogany Corp., divide the budgeted conversion costs of $640,000 by the practical capacity of 160,000 machine hours, which equals $4 per machine hour.

Step-by-step explanation:

The question is how to calculate the conversion rate for Mahogany Corp.'s blending operation. The conversion rate is found by dividing the budgeted conversion costs by the practical capacity in machine hours. Given that the budgeted conversion costs are $640,000 and the practical capacity is 160,000 machine hours, the conversion rate can be calculated as follows:

Conversion Rate = Budgeted Conversion Costs / Practical Capacity

Conversion Rate = $640,000 / 160,000 machine hours

Conversion Rate = $4 per machine hour

Therefore, the correct answer is a.$4 per machine hour.