Modern Lighting Inc, manufactures lighting fixtures, using. lean manufacturing methods. Style Omega has a materials cost per unit of $19. The budgeted conversion cost for the year is $119,700 for 1,900 production hours. A unit of Style Omega requires 12 minutes of cell production time. The following transactions took place during June:
1. Materials were acquired to assemble 730 Style Omega units for June.
2. Conversion costs were applied to 730 Style Omega units of production.
3. 680 units of Style Omega were completed in June.
4. 640 units of Style Omega were sold in June for $60 per unit.
a. Determine the budgeted cell conversion cost per hour. If required, round to the nearest cent. per hour
b. Determine the budgeted cell conversion cost per unit. If required, round to the nearest cent. per unit
c. Journalize the summary transactions (1)-(4) for June. If required, round your answers to one decimal place, If an amount box does not require an entry, leave it blank.
a. To determine the budgeted cell conversion cost per hour, we need to divide the total budgeted conversion cost for the year by the total number of production hours.
The budgeted conversion cost per hour is $119,700 / 1,900 production hours = $63 per hour.
b. To determine the budgeted cell conversion cost per unit, we need to divide the total budgeted conversion cost for the year by the total number of units to be produced.
Since we are only given the number of units completed (680 units), we need to use this number.
The budgeted cell conversion cost per unit is $119,700 / 680 units = $176.03 per unit.
c. Journal entries for June:
1. Materials purchased:
Date | Accounts | Debit | Credit
-------|------------------------|----------|---------
| Raw Materials Inventory| $13,870 |
| Accounts Payable | | $13,870
2. Conversion costs applied:
Date | Accounts | Debit | Credit
-------|-----------------------|-----------|---------
| Work in Process Inventory | $45,960 |
| Cell Conversion Costs | | $45,960
3. Units completed:
Date | Accounts | Debit | Credit
-------|------------------------|-----------|---------
| Finished Goods Inventory| $36,480 |
| Work in Process Inventory| | $36,480
4. Units sold:
Date | Accounts | Debit | Credit
-------|------------------|----------|---------
| Accounts Receivable| $38,400 |
| Sales Revenue | | $38,400
| Cost of Goods Sold| $24,960 |
| Finished Goods Inventory| | $24,960
a. To determine the budgeted cell conversion cost per hour, divide the total budgeted conversion cost for the year by the total production hours:
Budgeted cell conversion cost per hour = Total budgeted conversion cost / Total production hours
Budgeted cell conversion cost = $119,700
Total production hours = 1,900
Budgeted cell conversion cost per hour = $119,700 / 1,900 = $63 per hour
b. To determine the budgeted cell conversion cost per unit, divide the budgeted cell conversion cost per hour by the cell production time per unit:
Budgeted cell conversion cost per unit = Budgeted cell conversion cost per hour / Cell production time per unit
Cell production time per unit = 12 minutes
Convert cell production time per unit to hours:
12 minutes = 12/60 = 0.2 hours
Budgeted cell conversion cost per unit = $63 / 0.2 = $315 per unit
c. Journalize the summary transactions for June:
1. Materials were acquired to assemble 730 Style Omega units for June:
Debit Materials Inventory = $19 * 730 = $13,870
Credit Accounts Payable = $13,870
2. Conversion costs were applied to 730 Style Omega units of production:
Debit Work in Process Inventory = $63 * 1.2 (cell production time in hours) * 730 = $55,836
Credit Manufacturing Overhead = $55,836
3. 680 units of Style Omega were completed in June:
Debit Finished Goods Inventory = $19 * 680 = $12,920
Credit Work in Process Inventory = $12,920
4. 640 units of Style Omega were sold in June for $60 per unit:
Debit Accounts Receivable = $60 * 640 = $38,400
Credit Sales Revenue = $38,400
Debit Cost of Goods Sold = $19 * 640 = $12,160
Credit Finished Goods Inventory = $12,160