Author Question: Trusted Products Company makes a household appliance with model number L800. The goal for 2018 is to ... (Read 66 times)

kodithompson · **on:** Mar 6, 2021

Trusted Products Company makes a household appliance with model number L800. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of L800 units that can be produced. The industry market size for appliances increased 2% from 2017 to 2018. The following additional data are available for 2017 and 2018:

2017

2018

Units of L800 produced and sold

31,000

31,620

Selling price

$310

$290

Direct materials (square feet)

98,000

96,500

Direct material costs per square foot

$34

$36

Manufacturing capacity for L800 (units)

38,750

37,350

Total conversion costs

$1,162,500

$1,120,500

Conversion costs per unit of capacity

$30

Overall, was Trusted Products's strategy successful in 2018?
◦ Yes, because total revenues increased
◦ No, because operating income decreased
◦ No, because direct materials usage per unit increased
◦ No, because direct material cost per unit decreased

joneynes · **Reply #1 on:** Mar 6, 2021

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