Question

Modern Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style Omega has a materials cost per unit of $120. The budgeted conversion cost for the year is $192,000 for 2,000 production hours. A unit of Style Omega requires 15 minutes of cell production time. The following transactions took place during June:

1.	Materials were acquired to assemble 800 Style Omega units for June.
2.	Conversion costs were applied to 800 Style Omega units of production.
3.	785 units of Style Omega were completed in June.
4.	770 units of Style Omega were sold in June for $174 per unit.

	Required:
a.	Determine the budgeted cell conversion cost per hour.
b.	Determine the budgeted cell conversion cost per unit.
c.	Journalize the summary transactions for June. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS
Modern Lighting Inc.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 150 Raw and In Process Inventory 151 Finished Goods Inventory 180 Land 190 Equipment 191 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customers Refunds Payable 221 Notes Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends 34 Income Summary a. Determine the budgeted cell conversion cost per hour. ______ per hour b. Determine the budgeted cell conversion cost per unit. _____per unit c. Journalize the summary transactions for June 30. Refer to the Chart of Accounts for exact wording of account titles. JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10	REVENUE 410 Sales EXPENSES 510 Cost of Goods Sold 511 Conversion Costs 521 Advertising Expense 523 Depreciation Expense-Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

Answer-

a. Budgeted Conversion cost for 2000 hours = $192,000

Conversion cost per hour = $96 (192000/2000)

b. 15 minutes production time = 1 unit

1 hour production time = 4 unit

2000 hours production time = 8000 units (4*2000)

Budgeted conversion cost for 8000units = $192,000

Conversion cost for per unit = $24 (192000/8000)

c. 1. Raw and In Process Inventory Dr. 96,000 (800*120)

To Cash /accounts payable             96,000

(Purchasing the material for 800 units)

2. Conversion Cost Dr. 18,840 (785*$24/unit)

To Salaries Payable   18,840

(recording the labour salaries for 785 units produced)

3. Finished Goods Inventory Dr.         113,040

To Raw and In Process Inventory    94,200

To Conversion Cost                            18,840

(recording the finished goods production cost for 785 units)

4. Cost of goods sold Dr.             113,040

To Finished goods inventory 113,040

(recognizing the cost of gold sold for 785 units)

5. Cash/Accounts Receivable Dr. 133,980 (Plus 133,980@Sales tax, if any)

To sales                                         133,980

To sales tax payable                    if any

(recognizing sales and sales tax for 770 units )