Question

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

Answer 1

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)