Question

Modern Lighting Inc. manufactures lighting fixtures, using lean manufacturing methods. Style Omega has a materials cost per unit of $125. The budgeted conversion cost for the year is $171,600 for 1,950 production hours. A unit of Style Omega requires 15 minutes of cell production time. The following transactions took place during June:

1.	Materials were acquired to assemble 650 Style Omega units for June.
2.	Conversion costs were applied to 650 Style Omega units of production.
3.	635 units of Style Omega were completed in June.
4.	610 units of Style Omega were sold in June for $177 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 (1)-(4) for June. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTSModern 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

a. Determine the budgeted cell conversion cost per hour.

per hour

b. Determine the budgeted cell conversion cost per unit.

per unit

. Journalize the summary transactions (1)-(4) for June 30. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

Answer 1

a.

Budgeted cell conversion cost per hour = $171,600/1,950 = $88 per hour

Budgeted cell conversion cost per unit = $171,600 / 7,800 (1950*60/15) = $22 per unit

	General Journal	Debit	Credit
1.	Raw and in process inventory (650*$125)	$81,250
	Cash/ Accounts payable		$81,250
2.	Raw and in process inventory (650* $147(125+22)	$95,550
	Conversion cost		$95,550
3.	Finished goods inventory (635*$147)	$93,345
	Raw and in process inventory		$93,345
4.	Cost of goods sold (610*$147)	$89,670
	Finished goods inventory		$89,670
	Cash / Accounts receivable (610*$177)	$107,970
	Cost of goods sold		$107,970