Question

The annual budgeted conversion costs for a lean cell are $144,000 for 1,800 production hours. Each unit produced by the cell requires 9 minutes of cell process time. During the month, 1,000 units are manufactured in the cell. The estimated materials costs are $65 per unit. Provide the following journal entries:

a. Materials are purchased to produce 1,050 units.

b. Conversion costs are applied to 1,000 units of production.

c. 980 units are completed and placed into finished goods.

Answer 1

No	Account titles and explanation	Debit	Credit
a.	Raw and In process inventory (1050*$65)	$68250
	Accounts payable		$68250
	(To record materials purchased)
b.	Raw and In process inventory (1000*$12)	$12000
	Conversion costs		$12000
	(To record conversion costs applied)
c.	Finished goods inventory ($65+12)*980	$75460
	Raw and In process inventory		$75460
	(To record units transferred to finished goods)

Conversion cost per unit= $144000/1800*9/60= $12 per unit