Question

Ever-Brite Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style BB-01 has a materials cost per unit of $120. The budgeted conversion cost for the year is $192,000 for 2,000 production hours. A unit of Style BB-01 requires 15 minutes of cell production time. The following transactions took place during December:

Dec.	1	Materials were acquired to assemble 800 Style BB-01 units for December.
	3	Conversion costs were applied to 800 Style BB-01 units of production.
	14	785 units of Style BB-01 were completed in December.
	28	770 units of Style BB-01 were sold in December for $132 per unit.

	Required:
A.	Determine the budgeted cell conversion cost per hour.
B.	Determine the budgeted cell conversion cost per unit.
C.	Journalize the summary transactions for December. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

a) Budgeted cell conversion cost per hour = 192000/2000 = 96 per hour

b) Budgeted cell conversion cost per unit = 96*15/60 = 24 per unit

c) Journal entry :

Date	accounts & explanation	debit	credit
Dec 1	Raw material (800*120)	96000
	Account payabale		96000
	(To record material acquired)
Dec 3	Work in process (800*24)	19200
	Conversion cost		19200
	(To record conversion cost applied)
Dec 14	Finished goods inventory (144*785)	113040
	Work in process		113040
	(To record goods completed)
Dec 28	Account receivable (770*132)	101640
	Sales revenue		101640
	(To record sales)