Question

Lean Accounting

The annual budgeted conversion costs for a lean cell are $110,700 for 2,700 production hours. Each unit produced by the cell requires 18 minutes of cell process time. During the month, 1,170 units are manufactured in the cell. The estimated materials cost is $65 per unit. Provide the following journal entries:

a. Materials are purchased to produce 1,230 units.

b. Conversion costs are applied to 1,170 units of production.

c. 1,110 units are completed and placed into finished goods.

Answer 1

Journal Entries:

Date	Particulars	Debit	Credit
a.	Raw and in process inventory (1230 X $65)	$79,950
	Account payable		79,950
b.	Raw and in process inventory (1170 X $12.30)	$       14,391
	Conversion cost		$       14,391
c.	Finished goods inventory [1110 X ($65+$12.30)]	$ 85,803
	Raw and in process inventory		$85,803

Working Notes:

Budgeted conversion cost per unit = (110,700/2700)*18/60

= 12.3