Question

Lean AccountingModern Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style Omega has a materials cost per unit of $16. The budgeted conversion cost for the year is $308,000 for 2,200 production hours. A unit of Style Omega requires 18 minutes of cell production time. The following transactions took place during June:Materials were acquired to assemble 620 Style Omega units for June.Conversion costs were applied to 620 Style Omega units of production.600 units of Style Omega were completed in June.580 units of Style Omega were sold in June for $100 per unit.a. Determine the budgeted cell conversion cost per hour.$ per hourb. Determine the budgeted cell conversion cost per unit.$ per unitFeedbackc. Journalize the summary transactions (1)–(4) for June.

Answer 1

Answer:

(a) Conversion cost per hour:

= budgeted conversion cost ÷ production hours

= 308,000 ÷ 2,200

= $140 Per hr

Budgeted cell conversion cost per unit :

= $140 Per hr × (18 ÷ 60 )

= $42 per unit

The Journal entries are as follows:

(i) Raw and in process inventory A/c [620 × 16]  Dr. $9,920

To Account Payable                                                                 $9,920

(To record the Raw and in process inventory)

(ii) Raw and in process inventory A/c [620 × 42]  Dr. $26,040

To Conversion cost                                                                      $26,040

(To record the Conversion cost )

(iii) Finished good Inventory A/c [600 × 58]   Dr. $34,800

To Raw and in process inventory                                         $34,800

(To record the  Finished good Inventory )

(iv) Account Receivable  A/c  [580 × 100]  Dr.  $58,000

To sales                                                                             $58,000

(To record the sales )

(v) cost of goods sold A/c [580 × 58]  Dr. $33,640

To Finished good Inventory                                      $33,640

(To record the cost of goods sold)

conversion cost per unit = Direct Material + conversion cost

                                         = 16 + 42

                                         = 58