In: Accounting
Dashboard Inc. manufactures and assembles automobile instrument panels for both eCar Motors and Greenville Motors. The process consists of a lean product cell for each customer’s instrument assembly. The data that follow concern only the eCar lean cell.
For the year, Dashboard Inc. budgeted the following costs for the eCar production cell:
1 |
Conversion Cost Categories |
Budget |
2 |
Labor |
$657,000.00 |
3 |
Supplies |
41,000.00 |
4 |
Utilities |
30,000.00 |
5 |
Total |
$728,000.00 |
Dashboard Inc. plans 2,800 hours of production for the eCar cell for the year. The materials cost is $130 per instrument assembly. Each assembly requires 15 minutes of cell assembly time. There was no April 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory.
The following summary events took place in the eCar cell during April:
a. | Electronic parts and wiring were purchased to produce 8,400 instrument assemblies in April. |
b. | Conversion costs were applied for the production of 8,200 units in April. |
c. | 8,100 units were started, completed, and transferred to finished goods in April. |
d. | 8,020 units were shipped to customers at a price of $410 per unit. |
Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. | Determine the budgeted cell conversion cost per hour. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. | Determine the budgeted cell conversion cost per unit. If required, round your answer to the nearest whole dollar. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3. | Journalize the summary transactions (a) through (d). Refer to the Chart of Accounts for exact wording of account titles. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4. | Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5. |
How does the accounting in a lean environment differ from traditional accounting? The administrator of Hope Hospital has been asked to perform an activity analysis of the emergency room (ER). The ER activities include cost of quality and other patient care activities. The lab tests and transportation are hospital services external to the ER for determining external failure costs. The result of the activity analysis is summarized as follows:
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1) Budgeted Cell Conversion Cost Rate = Budgeted Cost/Hours of Production | ||
Budgeted Cell Conversion Cost Rate = $728,000/2800 hours | $260.00 | per hour |
2) Budgeted Cell Conversion Cost per Unit $260 per hr x (15 min. ÷ 60 min.) | 65 | Per unit |
3) | ||
Journal Entries | ||
Nov.4 | Debit | Credit |
Raw and In Process Inventory | $ 1,092,000.00 | |
Accounts Payable (8400 units x $130) | $ 1,092,000.00 | |
Nov.6 | ||
Raw and In Process Inventory | $ 533,000.00 | |
Conversion Cost (8200 units x $65) | $ 533,000.00 | |
Nov. 24 | ||
Finished Goods Inventory | $ 1,579,500.00 | |
Raw and In Process Inventory (8100 units x ($130 + $65) | $ 1,579,500.00 | |
Nov.29 | ||
Accounts Receivable (8020 units x $410) | $ 3,288,200.00 | |
Sales | $ 3,288,200.00 | |
Cost of Goods Sold | $ 1,563,900.00 | |
Finished Goods Inventory (8020 units x ($130+ $65) | $ 1,563,900.00 | |
4) | ||
Ending balance in Raw and In Process Inventory | ||
$1,092,000 + $533,000 - $1579500 | $ 45,500.00 | |
Ending Balance in Finished Goods Inventory | ||
$1,579,500 - $1563900 | $ 15,600.00 | |
5) | ||
Lean accounting is different from traditional accounting because it is more simplifiedand 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 |