Question

Lean Accounting

Com-Tel Inc. manufactures and assembles two models of smartphones-the Tiger Model and the Lion Model. The process consists of a lean cell for each product. The data that follow concern only the Lion Model lean cell.

For the year, Com-Tel Inc. budgeted these costs for the Lion Model production cell:

Conversion Cost Categories		Budget
Labor		$177,400
Supplies		67,200
Utilities		24,200
Total		$268,800

Com-Tel plans 3,200 hours of production for the Lion Model cell for the year. The materials cost is $71 per unit. Each assembly requires 20 minutes of cell assembly time. There was no May 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory.

The following summary events took place in the Lion Model cell during May:

Electronic parts were purchased to produce 10,900 Lion Model assemblies in May.

Conversion costs were applied for 10,350 units of production in May.

10,140 units were completed and transferred to finished goods in May.

9,840 units were shipped to customers at a price of $336 per unit.

If required, round your answers to the nearest cent.

Required:

1. Determine the budgeted cell conversion cost per hour.
$ per hour

2. Determine the budgeted cell conversion cost per unit.
$ per unit

3. Journalize the summary transactions (a) through (d).

a.
b.
c.
d. Sale
d. Cost

4. Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory.

Raw and In Process Inventory	$
Finished Goods Inventory	$

5. Lean accounting is different from traditional accounting because it is more ____ and uses____ control. As a result, the number of transactions are ____ . In many lean operations, purchased materials are charged to a ____ . Direct labor is frequently_____ . Often, nonfinancial performance measures, such as _____ , are used to monitor performance.

Answer 1

1

. Budgeted cell conversion cost per hour = $268,800/3,200hours = $84 per hour

2

. Budgeted cell conversion cost per unit = $268,800/9,600 = $28 per unit

Number of units assembled = (3,200 hours x 60)/20 minutes = 192,000 mins/20 mins = 9,600 units

3.

a.	Raw and In Process Inventory	773,900
	Accounts Payable (10,900 x $71)		773,900
b.	Raw and In Process Inventory	289,800
	Conversion Costs (10,350x $28)		289,800
c.	Finished goods inventory [10,140 x ($71 + $28)]	1,003,860
	Raw and In process inventory		1,003,860
d. Sale	Accounts receivable (9,840 x $336)	3,306,240
	Sales		3,306,240
d. Cost	Cost of goods sold [9,840 x ($71 + $28)]	974,160
	Finished goods inventory		974,160

4.

Raw and In process inventory: $773,900 + $289,800 - $1,003,860 = $59,840

Finished Goods Inventory: $1,003,860 - $974,160 = $29,700

5

In the just-in-time accounting, direct labor is frequently eliminated as a rate category and is instead included as a conversion rate of the cell. The cell conversion rate is also applied in to the raw and in the process inventory account. In addition, indirect labor is indirectly assigned to product cells; thus, less factory overhead is allocated to the products