Lean Accounting Com-Tel Inc. manufactures and assembles two models of smartphone

Question

Lean Accounting Com-Tel Inc. manufactures and assembles two models of smartphones-the Tiger Model and the Lion Model. The process consists of a lean cell for each product. The data that follow concern only the Lion Model lean cell For the year, Com-Tel Inc. budgeted the following costs for the Lion Model production cell: Conversion Cost Categories Labor Supplies Utilities Budget $122,000 49,000 18,000 $189,000 Total Com-Tel plans 2,100 hours of production for the Lion Model cell for the year. The materials cost is $185 per unit. Each assembly requires 12 minutes of cell assembly time There was no May 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory The following summary events took place in the Lion Model cell during May: a. Electronic parts were purchased to produce 900 Lion Model assemblies in May b. Conversion costs were applied for 875 units of production in May c. 850 units were completed and transferred to finished goods in May d. 800 units were shipped to customers at a price of $500 per unit. Required: 1. Determine the budgeted cell conversion cost per hour per hour 2. Determine the budgeted cell conversion cost per unit. per unit

Explanation / Answer

ANSWER # 1 Total budgeted cost for conversion 189000 Total hours 2100 Per hour cost of conversion 9 189000 divided by 2100 ANSWER # 2 As each assembly requires 12 minutes, it means that 5 units are assembled each hour (60/12) Hence: Budgeted conversion cost 189000 Budgeted Units 10500 2100 hours multiplied by 5 unit per hour Per unit cost of conversion 18 189000 divided by 10500 ANSWER # 3 Journal entries: Purchase of material 166500 Accounts Payable 166500 (Cost of 900 parts @ 185 each) Conversion Costs 15750 Cash / Bank 15750 (Conversion cost of 875 units @ 18 each) Account Receivble 400000 Sales revenue 400000 (Sales price of 800 nits @ 500 each) ANSWER # 4 Units @ Value Inventory: Raw Material 25 185 4625 In Process 25 203 5075 185 for material cost and 18 for conversion cost Finished Goods 50 500 25000

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