Question

Auto-Motion is a lean manufacturer of self-driving wheelchairs. The company budgets $748,000 of conversion costs and 2,200 production hours for the next year. Each wheelchair requires 20 production hours and materials costs of $4,410. The company started and completed 86 wheelchairs during the year and sold 75. Each wheelchair is sold for $15,400. Actual conversion costs equal applied conversion costs Required 1. Prepare journal entries to record (a) the purchase of raw materials on credit to produce 91 units, (b) applied conversion costs to the production of 86 units, (c) actual conversion costs of $584,800 (credit "Various Accounts"), (a) sale of 75 units on credit, and (e) ending inventory and cost of goods sold. 2. Compute the ending balances of Work in Process Inventory, Finished Goods Inventory, and Conversion Costs. Assume each of these inventory accounts began the year with a balance of zero. Complete this question by entering your answers in the tabs below.

Answer 1

1 a) Total amount of purchasing raw material =Total units* cost of raw material for 1 unit = 91*4410 =$401310

Journal entry-

Account Debit Credit

Raw material 401310

Creditors 401310

b) Total conversion cost used = Total units* material cost per unit = 86* 4410= $379260

Journal entry-

Account Debit Credit

Wheelchair    379260

Conversion cost    379260

C)

Journal entry-

Account Debit Credit

Wheelchair    584800

Various accounts 584800

d) Total sale value- Number of units* sale price per unit = 75*15400 = $1155000

Journal entry-

Account Debit Credit

Debtors     1155000

Sales 1155000

e) Value of finished inventory = (Total produced- total sold)* cost of wheel chair = (86-75)* 4410 = $48510

Cost of good sold= 75*4410 =330750

Account Debit Credit

Cost of goods sold 330750

Raw material account 282240

Finished Inventory 48510

Question 2- Ending balance of Finished goods inventory= (Total produced- total sold)* cost of wheel chair = (86-75)* 4410 = $48510

Conversion costs = Balance at the start of year- Amount used within the year = 7,48,000- (86*4410)= $368740

Number of units that can be produced with budgeted conversion cost = amount budgeted/ cost of material per unit= 748000/ 4410 = 170 units

Units actually produced = 86 units

Unproduced units = 170- 86 = 84 units

Balance of WIP inventory at the end of year = 84 * 4410= $370440