JIT Accounting Roo Mfg produces automobile instrument panels. Roo Mfg has adopte
ID: 2372567 • Letter: J
Question
JIT Accounting
Roo Mfg produces automobile instrument panels. Roo Mfg has adopted the JIT philosophy in their manufacturing plant. For the first year, Roo Mfg budgeted the following costs:
Conversion Cost categories Budget
Labor $642,000
Supplies 112,000
Utilities 26,000
Total $780,000
Roo Mfg plans 3,000 hours of production for the first year. The materials cost is $125 per instrument panel. Each assembly of a panel requires 24 minutes.
The following events took place during the month of October:
1. Electronic parts were purchased to produce 7,600 instrument panels in October.
2. Conversion costs were applied for the production of 7,500 units in October.
3. 7,420 units were started, completed, and transferred to finished goods in October.
4. 7,300 units were sold to customers at a price of $400 per unit.
Question: Determine the budgeted conversion cost per hour, & determine the budgeted conversion cost per unit. then Journalize the transactions 1 through 4 below.
DATE DESCRIPTION DEBIT CREDIT
Explanation / Answer
A) Budgeted Cost/hour = $260/hour
Total Budgeted Conversion Costs/Total Budgeted Hours = $780,000/3000 hours = $260/hour
B) Budgeted Conversion Cost/unit = $104/panel
Total Budgeted Conversion Cost/units expected to be producted
Hours to produce each panel = 24 minutes/panel divided by 60minutes/hour = 0.4hours/panel
Panels that could be produced in budgeted amount of time = 3000 hours divided by 0.4hours/panel = 7500 panels
Total budgeted conversion costs/total budgeted units= $780,000/7500 panels = $104/panel
C)
1. DR Direct Materials $950,000
CR Cash/Accounts Payable $950,000
7600 panels * $125/panel = $950,000 = Cost of Panels
2. DR Work In Process $780,000
CR Direct Materials $780,000
Conversion Cost of Panels = 7500 panels * $104/panel = $780,000
3. DR Finished Goods $1,699,180
CR Work in Process $1,699,180
Value of units transferred to finished goods = (direct material cost/panel + conversion cost/panel) * number of panels transferred to Finished Goods = ($104 + $125) * 7,420units = $1,699,180
4) 2 Transactions:
DR Cash/Accounts Receivable $2,920,000
CR Sales Revenue $2,920,000
DR COGS $1,671,700
CR Finished Goods $1,671,700
Sales Revenue = sales price * units sold = $400/unit * 7300 units = $2,920,000
COGS = (direct material cost/panel + conversion cost/panel) * number of panels sold = ($104 + $125) * 7,300units = $1,671,700
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