Question

In: Accounting

Lean Accounting Westgate Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players....

Lean Accounting

Westgate Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players. The company manufactures DVR players through a single product cell. The budgeted conversion cost for the year is $864,000 for 1,800 production hours. Each unit requires 12 minutes of cell process time. During March, 970 DVR players were manufactured in the cell. The materials cost per unit is $71. The following summary transactions took place during March:

Materials were purchased for March production.

Conversion costs were applied to production.

970 DVR players were assembled and placed in finished goods.

920 DVR players were sold for $296 per unit.

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

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

c. Journalize the summary transactions (1)–(4) for March.

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

Solutions

Expert Solution

Solution a:

Budgeted cell conversion cost per hour = Budgeted conversion cost / Budgeted production hours

= $864,000 / 1800 = $480 per hour

Solution b:

Hours required per unit = 12/60 = 0.20 hour

Budgeted cell conversion cost per unit = $480 * 0.20 = $96 per unit

Solution c:

Journal Entries - Westgate Inc.
Event Particulars Debit Credit
1 Raw and In Process Inventory Dr $68,870.00
         To Accounts Payable $68,870.00
(To record purchase of raw material)
2 Raw and In Process Inventory Dr $93,120.00
         To Conversion cost $93,120.00
(To record conversion cost applied)
3 Finished goods inventory Dr $161,990.00
         To Raw and In Process Inventory $161,990.00
(Being units completed transferred to finished goods)
4a Accounts receivables Dr $272,320.00
         To Sales revenue $272,320.00
(To record sales)
4b Cost of goods sold Dr (920*$167) $153,640.00
         To Finished goods inventory $153,640.00
(To record cost of goods sold)

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