Question

Modern Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style Omega has a materials cost per unit of $125. The budgeted conversion cost for the year is $171,600 for 1,950 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 650 Style Omega units for June.
2.	Conversion costs were applied to 650 Style Omega units of production.
3.	635 units of Style Omega were completed in June.
4.	610 units of Style Omega were sold in June for $177 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 (1)-(4) for June. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer
a
Budgeted cell conversion cost per hour	88	per hour	171600/1950
b
Budgeted cell conversion cost per unit	22	per unit	88*(15/60)
c
Accounts title	Debit	Credit
Raw and in process inventory	$        81,250		650*125
Accounts Payable		$        81,250
Raw and in process inventory	$        14,300		650*22
Conversion costs		$        14,300
Finished goods inventory	$        93,345		635*(125+22)
Raw and in process inventory		$        93,345
Accounts Receivable	$      107,970		610*177
Sales		$      107,970
Cost of goods sold	$        89,670		610*(125+22)
Finished goods inventory		$        89,670