Question 27.IP.1: Krisco Company operates under the just-in-time philosophy. A...
Krisco Company operates under the just-in-time philosophy. As such, it has a production cell for its microwave ovens. The conversion cost for 2,400 hours of production is budgeted for the year at $4,800,000. During January, 2,000 microwave ovens were started and completed. Each oven requires six minutes of cell processing time. The materials cost for each oven is $100.
Instructions
1. Determine the budgeted cell conversion cost per hour.
2. Determine the manufacturing cost per unit.
3. Journalize the entry to record the costs charged to the production cell in January.
4. Journalize the entry to record the costs transferred to finished goods.
1. Budgeted Cell Conversion Cost Rate = \frac{\$ 4,800,000}{2,400 hours} = $2,000 per cell hour
2. Materials $100 per unit
Conversion cost [($2,000 per hour/60 min.) × 6 min.] 200
Total \underline{\underline{\$ \ 300}} per unit
| 3. | Raw and In Process Inventory | 200,000 | ||||
| Accounts Payable | 200,000 | |||||
| To record materials costs.
(2,000 units × $100 per unit) |
||||||
| Raw and In Process Inventory | 400,000 | |||||
| Conversion Costs | 400,000 | |||||
| To record conversion costs.
(2,000 units × $200 per unit) |
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| 4. | Finished Goods (2,000 × $300 per unit) | 600,000 | ||||
| Raw and In Process Inventory | 600,000 | |||||
| To record finished production. |