Question

Lean Accounting

Modern Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style Omega has a materials cost per unit of $18. The budgeted conversion cost for the year is $182,700 for 2,900 production hours. A unit of Style Omega requires 10 minutes of cell production time. The following transactions took place during June:

Materials were acquired to assemble 780 Style Omega units for June.

Conversion costs were applied to 780 Style Omega units of production.

730 units of Style Omega were completed in June.

680 units of Style Omega were sold in June for $60 per unit.

a. Determine the budgeted cell conversion cost per hour. If required, round to the nearest cent.
$ per hour

b. Determine the budgeted cell conversion cost per unit. If required, round to the nearest cent.
$ per unit

c. Journalize the summary transactions (1)–(4) for June. If required, round your answers to one decimal place.

1.
2.
3.
4. Sale
4. Cost

Answer 1

Conversion cost per hour	=	$1,82,700 / 2,900
	=	$ 83.0	per hour
Budgeted cell conversion cost per unit	=	$83.05 X 10/60
	=	$ 13.8	per unit
Account Tittle and Explanation	Debit	Credit
Raw and in process inventory (780 X $18)	$ 14,040
Accounts Payable		$                 14,040
Raw and in process inventory (780 X $13.84)	$ 10,764
Conversion cost		$                 10,764
Finished goods inventory [($18 + $13.8) X 730]	$ 23,214
Raw and in process inventory		$                 23,214
Accounts receivables (680 X $60)	$ 40,800
Sales		$                 40,800
Cost of goods sold [($18 + $13.8) X 680]	$ 21,624
Finished goods inventory		$                 21,624