Question

Ever-Brite Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style BB-01 has a materials cost per unit of $45. The budgeted conversion cost for the year is $193,200 for 2,100 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 700 Style BB-01 units for December. 3 Conversion costs were applied to 700 Style BB-01 units of production. 14 685 units of Style BB-01 were completed in December. 28 670 units of Style BB-01 were sold in December for $128 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.

Chart of Accounts: CHART OF ACCOUNTS Ever-Brite Lighting Inc. General Ledger ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 150 Raw and In Process Inventory 151 Finished Goods Inventory 180 Land 190 Equipment 191 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customers Refunds Payable 221 Notes Payable EQUITY 31 Common Stock 32 Retained Earnings 33 Dividends 34 Income Summary REVENUE 410 Sales EXPENSES 510 Cost of Goods Sold 511 Conversion Costs 521 Advertising Expense 523 Depreciation Expense-Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

Solution 1A:

Budgeted conversion cost per hour = Budgeted conversion cost / Budgeted hours = $193,200 / 2100 = $92 per hour

Solution 1B:

Budgeted Cell conversion cost per unit = Budgeted conversion cost per hour * Hour per unit

= $92 * 15/60 = $23 per unit

Solution 1C:

Journal Entries - Ever Bright Lighting Inc.
Date	Particulars	Debit	Credit
1-Dec	Raw material and In Process Inventory Dr (700*$45)	$31,500.00
	To Accounts Payable		$31,500.00
	(Being material acquired)
3-Dec	Raw material and In Process Inventory Dr (700*$23)	$16,100.00
	To Conversion cost		$16,100.00
	(Being conversion cost applied to production)
14-Dec	Finished goods inventoy Dr (685*$68)	$46,580.00
	To Raw material and In Process Inventory		$46,580.00
	(Being units completed transferred to finished goods inventory)
28-Dec	Accounts receivables Dr (670*$128)	$85,760.00
	To Sales Revenue		$85760.00
	(To record sales revenue)
28-Dec	Cost of goods sold Dr (670*$68)	$45,560.00
	To Finished goods inventory		$45,560.00
	(To record COGS for unit sold)