Lean Accounting Optic Matrix Inc. manufactures and assembles automobile instrume

Question

Lean Accounting

Optic Matrix Inc. manufactures and assembles automobile instrument panels for both Yokohama Motors and Detroit Motors. The process consists of a just-in-time product cell for each customer's instrument assembly. The data that follow concern only the Yokohama just-in-time cell.

For the year, Optic Matrix Inc. budgeted the following costs for the Yokohama production cell:

Optic Matrix Inc. plans 2,800 hours of production for the Yokohama cell for the year. The materials cost is $71 per instrument assembly. Each assembly requires 18 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:

Electronic parts and wiring were purchased to produce 9,500 instrument assemblies in November.

Conversion costs were applied for the production of 9,050 units in November.

8,870 units were started, completed, and transferred to finished goods in November.

8,600 units were shipped to customers at a price of $336 per unit.

If required, round to the nearest cent.

Required:

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

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

3. Journalize the summary transactions (a) through (d).

4. Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory.

5. Lean accounting is different from traditional accounting because it is more and uses control.

Conversion Cost Categories Budget Labor $155,200 Supplies 58,800 Utilities 21,200    Total $235,200

Explanation / Answer

1). The budgeted cell conversion cost per hour.

Total hours of productions = 2800 hours

Budgeted conversion cost for the year = $235200

Conversion cost per hour = Conversion cost / Total hours

= $235200 / 2800

= $84 per hour

2). The budgeted cell conversion cost per unit.

Conversion cost per unit = Asemble time * Conversion cost per unit/ 60 minutes

= 18 minutes * $84/60

= $25.2 per unit

3). Journal Entries :-

4). Closing / Ending Balance :-

Raw and work in process inventory = (9500 - 9050) * $71 = $31950

Finished Goods Inventory = (8870 - 8600) * ($71+$25.2) = $25974

5). Lean Accounting is different from traditional accounting because it is more simple and uses minimal control.

Particulars Debit ($) Credit ($) a). Raw and work in process inventory A/c Dr. 642550 To Accounts Payable A/c (9050 units*$71) 642550 b) Raw and work in process inventory A/c Dr. 228060 To Conversion cost A/c (9050 units * $25.2) 228060 c) Finished Goods inventory A/c Dr. (9050 units*($25.2+$71)) 870610 To Raw and work in process invenroty A/c 870610 d) Sales A/c Dr. 2889600 To Accounts Receivable A/c(8600 units * $336) 2889600 Cost of goods Sold A/c Dr. 827320 To Finished Goods inventory A/c(8600 units * ($25.2+$71)) 827320

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