The theoretical cycle time for a product is 20 minutes per unit. The budgeted conversion costs for the manufacturing cell are $1,800,000 per year. The total labor minutes available are 400,000. During the year, the cell was able to produce 2 units of the product per hour.

Suppose also that production incentives exist to minimize unit product costs.

Required:

1. Compute the theoretical conversion cost per unit.

2. Compute the applied conversion cost per minute (the amount of conversion cost actu¬

ally assigned to the product).

3. Discuss how this approach to assigning conversion cost can improve delivery time per¬

formance.