Grand Prix Displays Inc. manufactures and assembles automobile instrument panels
ID: 2480475 • Letter: G
Question
Grand Prix Displays Inc. manufactures and assembles automobile instrument panels for both Yokohama Motors and Detroit Motors. The process consists of a lean product cell for each customer’s instrument assembly. The data that follow concern only the Yokohama lean cell.
For the year, Grand Prix Displays Inc. budgeted the following costs for the Yokohama production cell:
1
Conversion Cost Categories
Budget
2
Labor
$585,000.00
3
Supplies
45,000.00
4
Utilities
30,000.00
5
Total
$660,000.00
Grand Prix Displays Inc. plans 2,200 hours of production for the Yokohama cell for the year. The materials cost is $180 per instrument assembly. Each assembly requires 15 minutes of cell assembly time. There was no November 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory.
The following summary events took place in the Yokohama cell during November:
1
Conversion Cost Categories
Budget
2
Labor
$585,000.00
3
Supplies
45,000.00
4
Utilities
30,000.00
5
Total
$660,000.00
Explanation / Answer
1. Determine the budgeted cell conversion cost per hour.
Budgeted Cell Conversion Cost per unit = Total conversion cost / Total no. of hours
................................................................= $660,000 / 2,200 hours
................................................................= $300 per hour
2. Determine the budgeted cell conversion cost per unit.
Conversion cost per unit = (Cell Process time / 60 minutes) x Conversion Rate
........................................= (15 min. / 60 min.) x $300
........................................= $75
3. Record Journal Entries
4. Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory.
Raw and In Process Inventory = $1,620,000 + $$660,000 - $2,205,750
.................................................= $74,250
Finished Goods Inventory = $2,205,750 - $2,193,000
..........................................= $12,750
Date Account Titles and Explanation Debit Credit a Raw Materials and In Process Inventory (9,000 x $180) $1,620,000 Accounts Payable $1,620,000 (To record material purchased) b Raw Materials and In Process Inventory (8,800 X $75) $660,000 Conversion Costs $660,000 (To record conversion cost expenses) c Finished goods inventory (8,650 x ($180 + $75)) $2,205,750 Raw Material and in process inventory $2,205,750 (To transfer cost to finished goods inventory) d Cost of Goods sold (8,600 x ($180 + $75)) $2,193,000 Finished Goods Inventory $2,193,000 (To record cost of goods sold) Accounts Receivable (8,600 x $400) $3,440,000 Sales $3,440,000 (To record sales)Related Questions
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