Lean Accounting Westgate Inc. uses a lean manufacturing strategy to manufacture

Question

Lean Accounting

Westgate Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players. The company manufactures DVR players through a single product cell. The budgeted conversion cost for the year is $600,000 for 2,000 production hours. Each unit requires 21 minutes of cell process time. During March, 500 DVR players were manufactured in the cell. The materials cost per unit is $60. The following summary transactions took place during March:

Materials were purchased for March production.

Conversion costs were applied to production.

500 DVR players were assembled and placed in finished goods.

480 DVR players were sold for $240 per unit.

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

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

Explanation / Answer

a. Determine the budgeted cell conversion cost per hour.
Budgeted cell conversion cost per hour = 600000/2000 = 300 per hour

b. Determine the budgeted cell conversion cost per unit.
Budgeted cell conversion cost per unit = 300*21/60 = 105 per unit

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