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 | Accounts receivable | $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 AND 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_forwardKrouse Company produces two products, forged putter heads and laminated putter heads, which are sold through specialty golf shops. The company is in the process of developing itsoperating budget for the coming year. Selected data regarding the companys two products areas follows: Manufacturing overhead is applied to units using direct labor hours. Variable manufacturing overhead Ls projected to be 25,000, and fixed manufacturing overhead is expected to be15,000. The estimated cost to produce one unit of the laminated putter head is: a. 42. b. 46. c. 52. d. 62.arrow_forwardRDI Products Co. manufactures a variety of products made of plastic and aluminum components. During the winter months, substantially all of the production capacity is devoted to the production of lawn sprinklers for the following spring and summer seasons. Other products are manufactured during the remainder of the year. The company has developed standard costs for its several products. Standard costs for each year are set in the preceding October. The standard cost of a sprinkler for the current year is $3.70, computed as follows: During February, RDI Products manufactured 8,500 good sprinklers. The company incurred the following costs, which it charged to production: Materials price variations are not determined by usage but are charged to a materials price variation account at the time of purchase. All materials are carried in inventory at standard prices. Materials purchases for February were as follows: *Due to plastic shortages, the company was forced to purchase lower-grade plastic than called for in the standards. This increased the number of sprinklers rejected on inspection. Required: Calculate price and usage variances for each type of material and for labor, using the formulas on pages 421–422 and 424.arrow_forward
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