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Prime cost, conversion cost and total cost

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Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer
games. The games are sent directly to Star, and after the games are repaired, Star bills the game
manufacturer for cost plus a 20 percent markup. In the month of February, purchases of parts
(replacement parts) by Star amounted to $97,000, the beginning inventory of parts was $38,500,
and the ending inventory of parts was $15,250. Payments to repair technicians during the month of
February totaled $52,500. Overhead incurred was $121,000.
a. What was the cost of materials used for repair work during the month of February?
b. What was the prime cost for February?
c. What was the conversion cost for February?
d. What was the total repair cost for February?

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Solution Summary

Star Repairs Co. does all the repair work for a medium-sized manufacturer of handheld computer
games. The games are sent directly to Star, and after the games are repaired, Star bills the game
manufacturer for cost plus a 20 percent markup. In the month of February, purchases of parts
(replacement parts) by Star amounted to $97,000, the beginning inventory of parts was $38,500,
and the ending inventory of parts was $15,250. Payments to repair technicians during the month of
February totaled $52,500. Overhead incurred was $121,000.
a. What was the cost of materials used for repair work during the month of February?
b. What was the prime cost for February?
c. What was the conversion cost for February?
d. What was the total repair cost for February?

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Solution:

1. Cost of materials used for repair work = Beginning inventory + Material purchases - Ending ...

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  • MCom, Annamalai University
  • IATA, International Air Transport Association
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