Question 9.5: Ryan plc manufactures a control assembly for Ford Motor’s au...
Ryan plc manufactures a control assembly for Ford Motor’s auto steering columns. Ryan uses a JIT production system. All conversion costs for the JIT line, such as direct and indirect labor, depreciation, and other overhead items, are budgeted at €8.8 million. Ryan expects to produce 2.2 million control assemblies this year. Each assembly has overhead of €4 per unit. Last week, factory labor was €38,000 and €59,000 of materials were purchased and used to produce 10,000 control assemblies. These units were shipped and billed to Ford Motor. Summarize the accounting entries for these activities.
The activities are summarized as follows:
| Change in materials inventory | € 0 |
| Total conversion costs incurred | €78,000 [€38,000 + €4(10,000 units)] |
| Change in finished goods inventory | € 0 |
| Cost of goods sold incurred | €137,000 [€78,000 + €59,000] |
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