Perfect Pad manufacturers floor mats for trailers that are used to transport horses. The mats provide for a firm footing surface that quickly sheds water. Mats are made to customer specifications via orders submitted over an internet site. The mats are completed and shipped in about one day. As a result, Perfect Pad does not maintain any work in process or finished goods inventory. The following costs were incurred in producing and selling mats during August: Synthetic rubber used in the mat $134,300 Lubricant used in the molding machine 14,000 Factory rent 9,600 Electricity to run the molding machine 2,600 Labor cost of machine operators 34,100 Internet sales site 1,500 Administrative salaries 12,500 Depreciation of molding machine 7,400 Salary of factory safety inspector 3,500 Office rent 13,500 Evaluate these costs, and determine the amount of direct material, direct labor, factory overhead, and selling/general/administrative costs. Next, identify how much is considered to be a “prime cost” and how much is considered to be a “conversion cost.
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