Concept explainers
a)
Lean Manufacturing: Lean manufacturing aims at reducing the cost and minimizing the waste involved in the production, in order to optimize the value for the product or the service.
Lean Accounting: Lean accounting refers to the accounting standards that support the concepts of lean manufacturing. They record and reflect the transactions done to assist lean manufacturing.
Conversion Cost: The cost involved in the conversion of the raw material into the processed product is known as the conversion cost.
To Determine: The conversion cost per hour for the budgeted cell.
a)
Explanation of Solution
Calculate the conversion cost per hour for the budgeted cell.
Hence, the conversion cost per hour for the budgeted cell is $210 per hour.
b)
The conversion cost per unit for the budgeted cell.
b)
Explanation of Solution
Calculate the conversion cost per unit for the budgeted cell.
Hence, the conversion cost per hour for the budgeted cell is $31.50 per unit.
c)
To Journalize: The given transactions.
c)
Explanation of Solution
1.
Materials purchased for July production.
Date | Account Title | Debit ($) | Credit ($) |
July | Raw and In-Process Inventory (1) | $148,500 | |
Accounts payable | $148,500 | ||
(Purchase of goods on account) |
Table (1)
- Raw materials are purchased, which is an asset increased. Hence debit the raw and in-process inventory with $148,500.
- Accounts payable is a liability increased; hence credit the accounts payable account with $148,500.
Working Note:
Calculate the amount of goods purchased.
The cost of raw and in-process inventory is $148,500.
2.
Conversion cost applied to production.
Date | Account Title | Debit ($) | Credit ($) |
July | Raw and In-Process Inventory (2) | $34,650 | |
Conversion Costs | $34,650 | ||
(The conversion costs involved in the production) |
Table (2)
- Value is added to the raw materials, which is an asset increased. Hence debit the raw and in-process inventory with $34,650.
- Conversion cost is an expense which reduces the
stockholder's equity ; hence credit the conversion cost account with $34,650.
Working Note:
Calculate the amount value added.
The cost of conversion for produced units is $34,650.
3.
Completion of 1,100 units of DVR players.
Date | Account Title | Debit ($) | Credit ($) |
July | Finished Goods Inventory (3) | $183,150 | |
Raw and In-Process Inventory | $183,150 | ||
(The completion of 1,100 units placed in finished goods) |
Table (3)
- Value is added to the finished goods, which is an asset increased. Hence debit the finished goods inventory with $183,150.
- Value of the raw materials, which is an asset, is decreased. Hence credit the raw and in-process inventory with $183,150.
Working Note:
Calculate the amount value added.
The cost of conversion for 1,100 units is $183,150.
4.
Sold 1,060 units of DVR players.
Date | Account Title | Debit ($) | Credit ($) |
July | $355,100 | ||
Sales (4) | $355,100 | ||
(Sold 1,060 units of DVR players) |
Table (4)
- Accounts receivable, which is an asset, is increased. Hence debit the accounts receivable account with $355,100.
- Sales are revenue generated, which increases stockholder's equity. Hence credit the sales with $355,100.
Working Note:
Calculate the amount value added.
The sales price for 480 units is $355,100.
5.
Record the cost of goods sold.
Date | Account Title | Debit ($) | Credit ($) |
July | Cost of Goods sold (5) | $176,490 | |
Finished Goods Inventory | $176,490 | ||
(The cost of goods sold is recorded) |
Table (5)
- Cost of goods sold, is an asset decreased. Hence debit the cost of goods sold with $176,490.
- Finished goods inventory, which is an asset, is decreased. Hence credit the finished goods inventory with $176,490.
Working Note:
Calculate the amount value added.
The cost of goods sold for 480 units is $176,490
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Chapter 27 Solutions
Financial & Managerial Accounting
- Salisbury Bottle Company manufactures plastic two-liter bottles for the beverage industry. The cost standards per 100 two-liter bottles are as follows: At the beginning of March, Salisburys management planned to produce 500,000 bottles. The actual number of bottles produced for March was 525,000 bottles. The actual costs for March of the current year were as follows: a. Prepare the March manufacturing standard cost budget (direct labor, direct materials, and factory overhead) for Salisbury, assuming planned production. b. Prepare a budget performance report for manufacturing costs, showing the total cost variances for direct materials, direct labor, and factory overhead for March. c. Interpret the budget performance report.arrow_forwardJoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT estimated variable factory overhead of 600,000 and fixed factory overhead of 400,000. JoyT uses a standard costing system, and factory overhead is allocated to units produced using standard direct labor hours. The level of activity budgeted for this year was 10,000 direct labor hours, and JoyT used 10,300 actual direct labor hours. Based on the output accomplished during this year, 9,900 standard direct labor hours should have been used. Actual variable factory overhead was 596,000, and actual fixed factory overhead was 410,000 for the year. Based on this information, the variable factory overhead controllable variance for JoyT for this year was: a. 24,000 unfavorable. b. 2,000 unfavorable. c. 4,000 favorable. d. 22,000 favorable.arrow_forwardNozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost of the sales order processing activity is 250,000 and 50,000 sales orders are estimated to be processed. a. Determine the activity rate of the sales order processing activity. b. Determine the amount of sales order processing cost associated with 30,000 sales orders.arrow_forward
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