Answer the Following Questions Using the Information Below:
Crynton Company

question 15

Multiple Choice

Answer the following questions using the information below:
Crynton Company makes a household appliance with model number L800. The goal for 2015 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 5% from 2014 to 2015. The following additional data are available for 2014 and 2015:
$\begin{array}{lrr}&2014&2015\\\text { Units of L800 produced and sold } & 30,000 & 31,500 \\\text { Selling price } & \$ 300 & \$ 285 \\\text { Direct materials (square feet) } & 90,000 & 87,000 \\\text { Direct material costs per square foot } & \$ 30 & \$ 33\\\text { Manufacturing capacity for L800 (units) } & 37,500 & 36,000 \\\text { Total conversion costs } & \$ 750,000 & \$ 720,000 \\\text { Conversion costs per unit of capacity } & \$ 60 & \$ 60\end{array}$
-What is the cost effect of the growth component for direct materials?

• A) $135,000 U
• B) $450,000 F
• C) $450,000 U
• D) $135,000 F

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Definitions:

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