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

Question

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.

Accepted Answer

1. Budgeted Cell Conversion Cost Rate = [latex]\frac{\$ 4,800,000}{2,400 hours}[/latex] = $2,000 per cell hour

2. Materials $100 per unit

Conversion cost [($2,000 per hour/60 min.) × 6 min.] 200

Total [latex]\underline{\underline{\$ \ 300}}[/latex] 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)

4.	Finished Goods (2,000 × $300 per unit)	600,000
	Raw and In Process Inventory		600,000
	To record finished production.

Question 27.IP.1: Krisco Company operates under the just-in-time philosophy. A...

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