Question

Lean Accounting

Vintage Audio Inc. manufactures audio speakers. Each speaker requires $111 per unit of direct materials. The speaker manufacturing assembly cell includes the following estimated costs for the period:

Speaker assembly cell, estimated costs:
Labor	$60,640
Depreciation	8,130
Supplies	2,960
Power	2,220
Total cell costs for the period	$73,950

The operating plan calls for 170 operating hours for the period. Each speaker requires 12 minutes of cell process time. The unit selling price for each speaker is $301. During the period, the following transactions occurred:

1. Purchased materials to produce 480 speaker units.
2. Applied conversion costs to production of 455 speaker units.
3. Completed and transferred 435 speaker units to finished goods.
4. Sold 420 speaker units.

There were no inventories at the beginning of the period.

a. Journalize the summary transactions (1)-(4) for the period. Round the per unit cost to the nearest cent and use in subsequent computations. If an amount box does not require an entry, leave it blank.

1.	Cost of Goods Sold
	Raw and In Process Inventory
2.
3.
4. Sale
4. Cost

Feedback

a. In lean manufacturing, there are fewer transactions to record, thus simplifying the accounting system. Some accounts are combined. For example, all in-process work is combined with raw materials to form a new account, Raw and In Process (RIP) Inventory and direct labor is also combined with other costs to form a new account titled Conversion Costs. Indirect labor is directly assigned to product cells; thus, less factory overhead is allocated to products. The cell conversion rate is similar to a predetermined factory overhead rate, except that it includes all conversion costs in the numerator.

b. Determine the ending balance of raw and in process inventory and finished goods inventory.

Raw and In Process Inventory, ending balance	$
Finished Goods Inventory, ending balance	$

Answer 1

a)	Journal Entries
	Events	Particulars			Debit	Credit
	1)	Raw and In process inventory			$   53,280.00
		To Accounts Payable				$   53,280.00
		(480 x $ 111)
	2)	Raw and In process inventory			$   39,585.00
		To Conversion Cost				$   39,585.00
		(W.N.1)
	3)	Finished Goods Inventory			$   86,130.00
		To Raw and In process inventory				$   86,130.00
		(W.N.2)
	4)	Accounts Receivable			$ 126,420.00
		To Sales				$ 126,420.00
		(420 speakers x $ 301)
		Cost of Goods sold			$   83,160.00
		To Finished Goods Inventory				$   83,160.00
		(W.N.3)

W.N.1
Total Estimated Cell Cost for the period				$ 73,950.00
Total Operating hours estimated				170
Cell cost per operating hour			(a)	$      435.00
NO. of speakers produced				455
Cell process time of for each speaked				12	minutes
Total cell process time required				5460	minutes
In hours			(b)	91
Total Conversion cost			(a x b)	$ 39,585.00
W.N.2
Material Cost for 435 speakers				$ 48,285.00	($ 53280 x 435/480)
Conversion cost of 435 speakers				$ 37,845.00	($ 39585 x 435/455)
Transferred to Finished Goods				$ 86,130.00
W.N.3
Cost of selling 420 speakers				$ 83,160.00	($ 86130 x 420/435)

b)	Raw and In process inventory ending balance					$ 4,995.00	($ 53280 - $ 48285)
	Finished Goods Inventory ending balance					$ 2,970.00	($ 86130 - $ 83160)