At the beginning of last year, Jean Bingham, controller for Thorpe Inc., prepared the following budget for conversion costs at two levels of activity for the coming year:

During the year, the company worked a total of 112,000 direct labor hours and incurred the following actual costs:

Thorpe applied overhead on the basis of direct labor hours. Normal volume of 120,000 direct labor hours is the activity level to be used to compute the predetermined overhead rate.
Required:
1. Determine the cost formula for each of Thorpe€™s conversion costs.
2. Prepare a performance report for Thorpe€™s conversion costs for last year. Should any cost item be given special attention? Explain.

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Direct Labor Hours 100,000 120,000 Direct labor Supervision Utilities Depreciation $1,000,000 $1,200,000 80,000 180,000 21,000 225,000 225,000 30,000 240,000 284,000 120,000 120,000 70,000 $1,868,000 $2, 130,000 18,000 25,000 Maintenance Rent Other 60,000 Total manufacturing cost Direct labor Supervision Utilities Depreciation $963,200 Supplies 24,640 237,000 120,000 60,500 190,000 Mainenance 20,500 225 Rent ,000 Other