The Bright Lamp Company has budgeted its conversion cost for the small lamp prod

Question

The Bright Lamp Company has budgeted its conversion cost for the small lamp production as $85,000 for 1,300 production hours. Each unit produced by the cell requires 15 minutes of process time. During the month, 3,800 units are manufactured in the cell. The estimated material cost is $18 per unit. Provide the following journal entries.

In your computations, round per unit cost to two decimal places and use rounded amount in subsequent calculations. If required, round your final answers to the nearest dollar.

a. Materials are purchased to produce 4,000 units.

b. Conversion costs are applied to 3,800 units of production.

c. 3,650 units are placed into finished goods.

Explanation / Answer

a. Materials are purchased to produce 4,000 units.

Raw and in process inventory                                           72000

Accounts payable ($18 per unit * 4000 unit)                                 72000

b. Conversion costs are applied to 3,800 units of production.

Raw and in process inventory                                           62111

Conversion costs                                                                                62111

[($85000 / 1300 hours) * (15 min. / 60 min)] = $16.345

($16.345 * 3800 units) = $62111

c. 3,650 units are placed into finished goods.

Finished goods inventory                                  125359

Raw and in process inventory                          125359

($18 + $16.345) * 3650 units = 125359.25

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