Question

Krisco Company operates under the lean philosophy. As such, it has a production cell for its

microwave ovens. The conversion cost for 2,400 hours of production is budgeted for the year at $4,800,000.

During January, 2,000 microwave ovens were started and completed. Each oven requires

6 minutes of cell processing time. The materials cost for each oven is $100.

Instructions

Use lean accounting to:

1. Determine the budgeted cell conversion cost per hour.

2. Determine the manufacturing cost per unit.

3. Journalize the entry to record the costs charged to the production cell in January.

4. Journalize the entry to record the costs transferred to finished goods

Answer 1

1) Conversion cost per machine hour = 4800000/2400 = 2000 per hour

2) Calculate manufacturing cost per unit :

Conversion cost per unit (2000*.10)	200
Material cost per unit	100
Total manufacturing cost per unit	300

3&4) Journal entry :

No.	accounts & explanation	debit	credit
3	Work in process (300*2000)	600000
	Material		200000
	Conversion cost		400000
	(To record cost charged to production)
4	Finished goods	600000
	Work in process		600000
	(To record cost transferred to finished goods)