Young company has planned to create a department to produce radios for the up coming year....
Young company has planned to create a department to produce radios for the up coming year. The Dept. has budgeted conversion cost of $500,000. The Dept. started and completed 850 units. The Dept. process time is 20 minutes per unit. The Dept. planned to be available 3,000 hours for production. The unit requires $20 of material cost per unit.
a) What is the cost to be debited to finished goods for the period and b) the journal entry to record the transfer to finished goods. (SHOW ALL WORK)
Homework Answers
Requirement a:
| Direct materials | $17,000 |
| Conversion costs (Direct labor & Overhead) | $47,222 |
| Cost to be debited to finished goods | $64,222 |
Calculations:
i. Cost of direct materials = 850 units x $20 per unit = $17,000
ii. Conversion cost per hour = Budgeted conversion cost ÷ Planned hours of production = $500,000 ÷ 3,000 = $166.667
Actual number of hours = 850 units x (20/60) = 283.333 hours
Conversion cost = 283.333 hours x $166.667 = $47,222
.
Requirement b:
| Account title and explanation | Debit | Credit |
| Finished goods inventory | $64,222 | |
| Work in process inventory | $64,222 | |
| [To record transfer to finished goods] |
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