In: Accounting
Lean Accounting
Westgate Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players. The company manufactures DVR players through a single product cell. The budgeted conversion cost for the year is $802,200 for 1,910 production hours. Each unit requires 20 minutes of cell process time. During March, 950 DVR players were manufactured in the cell. The materials cost per unit is $69. The following summary transactions took place during March:
Materials were purchased for March production.
Conversion costs were applied to production.
950 DVR players were assembled and placed in finished goods.
900 DVR players were sold for $370 per unit.
a. Determine the budgeted cell conversion cost
per hour. If required, round to the nearest dollar.
$ per hour
b. Determine the budgeted cell conversion cost
per unit. If required, round to the nearest dollar.
$ per unit
c. Journalize the summary transactions (1)–(4) for March.
1. | |||
2. | |||
3. | |||
4. Sale | |||
4. Cost | |||
Solution a:
Budgeted cell conversion cost per hour = $802,200 / 1910 = $420 per hour
Solution b:
budgeted cell conversion cost per unit = $420 * 20/60 = $140 per unit
Solution c:
Journal Entries - Westgate Inc. | |||
Event | Particulars | Debit | Credit |
1 | Raw and In Process Inventory Dr | $65,550.00 | |
To Accounts payable | $65,550.00 | ||
(To record material purchased on account) | |||
2 | Raw and In Process Inventory Dr (950*$140) | $133,000.00 | |
To Conversion cost | $133,000.00 | ||
(Being conversion cost applied) | |||
3 | Finished goods inventory Dr | $198,550.00 | |
To Raw and In Process Inventory | $198,550.00 | ||
(Being completed units transferred to finished goods) | |||
4a | Accounts receivables Dr | $333,000.00 | |
To Sales revenue | $333,000.00 | ||
(To record sales on account) | |||
4b | Cost of goods sold Dr (900*$209) | $188,100.00 | |
To Finished goods inventory | $188,100.00 | ||
(To record cost of goods sold) |