Question

Lean Accounting

Com-Tel Inc. manufactures and assembles two models of smartphones—the Tiger Model and the Lion Model. The process consists of a lean cell for each product. The data that follow concern only the Lion Model lean cell.

For the year, Com-Tel Inc. budgeted these costs for the Lion Model production cell:

Conversion Cost Categories		Budget
Labor		$71,300
Supplies		27,000
Utilities		9,700
Total		$108,000

Com-Tel plans 1,800 hours of production for the Lion Model cell for the year. The materials cost is $51 per unit. Each assembly requires 15 minutes of cell assembly time. There was no May 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory.

The following summary events took place in the Lion Model cell during May:

1. Electronic parts were purchased to produce 6,100 Lion Model assemblies in May.
2. Conversion costs were applied for 5,800 units of production in May.
3. 5,680 units were completed and transferred to finished goods in May.
4. 5,510 units were shipped to customers at a price of $240 per unit.

If required, round your answers to the nearest cent.

Required:

1. Determine the budgeted cell conversion cost per hour.
$ per hour

2. Determine the budgeted cell conversion cost per unit.
$ per unit

3. Journalize the summary transactions (a) through (d). If an amount box does not require an entry, leave it blank.

a.
b.
3.
4. Sale
4. Cost

4. Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory.

Raw and In Process Inventory	$
Finished Goods Inventory	$

5. Lean accounting is different from traditional accounting because it is more   and uses   control. As a result, the number of transactions are  . In many lean operations, purchased materials are charged to a  . Direct labor is  . Often, nonfinancial performance measures, such as  , are used to monitor performance.

Answer 1

1
Budgeted cell conversion cost per hour	60	per hour	=108000/1800
2
Budgeted cell conversion cost per unit	15	per unit	=60*(15/60)
3
Raw and in process inventory	311100		=6100*51
Accounts Payable		311100
Raw and in process inventory	87000		=5800*15
Conversion costs		87000
Finished goods inventory	374880		=5680*(51+15)
Raw and in process inventory		374880
Accounts Receivable	1322400		=5510*240
Sales		1322400
Cost of goods sold	363660		=5510*(51+15)
Finished goods inventory		363660
4
Raw and In Process Inventory	23220		=311100+87000-374880
Finished Goods Inventory	11220		=374880-363660
5
Lean accounting is different from traditional accounting because it is more simplified and uses minimal control. As a result, the number of transactions are reduced . In many lean operations, purchased materials are charged to a "raw and in process inventory" account Direct labor is frequently included as a conversion cost of the cell . Often, nonfinancial performance measures, such as lead time or quality measures are used to monitor performance.