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Madison Industries has equivalent units of 8,000 for materials and for conversion costs. Total manufacturing costs are $128,000. Total materials costs are $96,000. How much is the conversion cost per unit

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Answer:

$16

Explanation:

The conversion cost per unit is the ratio of the total conversion cost to the total number of units produced.

The total conversion cost is the total manufacturing cost and it is made up of the material cost, labor cost and manufacturing overheads.

Total Manufacturing Cost = Direct Labor Cost + Direct Materials Cost + Manufacturing Overhead Cost

Hence conversion cost per unit

=$128,000/8000

= $16 per unit

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