Lean Accounting Com Tel Inc manufactures and assembles two models of smartphones the Tiger Model and the Lion Model The processconsists of a lean cell for each product The data that follow concern only the Lion Model lean cell For the year, Com Tel Inc budgeted these costs for the Lion Model production cell Conversion Cost Categories Budget Labor $166,300 Supplies 63,000 Utilities 22,700 Total $252,000 Com Tel plans 3,000 hours of production for the Lion Model cell for the year The materials cost is $71 per unit Each assembly requires 18 minutes of cell assembly time There was no May 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory The following summary events took place in the Lion Model cell during May Electronic parts were purchased to produce 10,200 Lion Model assemblies in May Conversion costs were applied for 9,700 units of production in May 9,510 units were completed and transferred to finished goods in May 9,220 units were shipped to customers at a price of $336 per unit If required, round your answers to the nearest cent Required 1 Determine the budgeted cell conversion cost per hour $ per hour 2 Determine the budgeted cell conversion cost per unit $ per unit Feedback 1 Cell Conversion Cost Rate Budgeted Conversion Cost Planned Hours of Production 2 Conversion Cost for Smartphone Manufacturing Time Cell Conversion Cost Rate Learning Objective 2 3 Journalize the summary transactions (a) through (d) a Raw and In Process Inventory Accounts Payable b Raw and In Process Inventory Conversion Costs c Finished Goods Inventory Raw and In Process Inventory d Sale Accounts Receivable Sales d Cost Cost of Goods Sold Finished Goods Inventory Feedback 3 In lean manufacturing, there are fewer transactions to record, thus simplifying the accounting system Some accounts are combined For example, all in process work is combined with raw materials to form a new account, Raw and In Process (RIP) Inventory and direct labor is also combined with other costs to form a new account titled Conversion Costs Indirect labor is directly assigned to product cells thus, less factory overhead is allocated to products The cell conversion rate is similar to a predetermined factory overhead rate, except that it includes all conversion costs in the numerator Learning Objective 2 4 Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory Raw and In Process Inventory $ Finished Goods Inventory $ 5 Lean accounting is different from traditional accounting because it is more complex and uses maximum control As a result, the number of transactions are increased In many lean operations, purchased materials are charged to a raw and in process inventory account Direct labor is frequently included as a conversion cost of the cell Often, nonfinancial performance measures, such as lead time or quality measures , are used to monitor performance

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Lean Accounting Com-Tel Inc. manufactures and assembles two models of smartphones-the Tiger Model and the Lion Model. The processconsists of a lean cell for each

Lean Accounting

Com-Tel Inc. manufactures and assembles two models of smartphones-the Tiger Model and the Lion Model. The processconsists of a lean cell for each product. The data that follow concern only the Lion Model lean cell.

For the year, Com-Tel Inc. budgeted these costs for the Lion Model production cell:

Conversion Cost Categories		Budget
Labor		$166,300
Supplies		63,000
Utilities		22,700
Total		$252,000

Com-Tel plans 3,000 hours of production for the Lion Model cell for the year. The materials cost is $71 per unit. Each assembly requires 18 minutes of cell assembly time. There was no May 1 inventory for either Raw and In Process Inventory or Finished Goods Inventory.

The following summary events took place in the Lion Model cell during May:

Electronic parts were purchased to produce 10,200 Lion Model assemblies in May.

Conversion costs were applied for 9,700 units of production in May.

9,510 units were completed and transferred to finished goods in May.

9,220 units were shipped to customers at a price of $336 per unit.

If required, round your answers to the nearest cent.

Required:

1. Determine the budgeted cell conversion cost per hour. $ per hour

2. Determine the budgeted cell conversion cost per unit. $ per unit

Feedback

1. Cell Conversion Cost Rate = Budgeted Conversion Cost Planned Hours of Production

2. Conversion Cost for Smartphone = Manufacturing Time Cell Conversion Cost Rate

Learning Objective 2.

3. Journalize the summary transactions (a) through (d).

a.	Raw and In Process Inventory
	Accounts Payable
b.	Raw and In Process Inventory
	Conversion Costs
c.	Finished Goods Inventory
	Raw and In Process Inventory
d. Sale	Accounts Receivable
	Sales
d. Cost	Cost of Goods Sold
	Finished Goods Inventory

Feedback

3. In lean manufacturing, there are fewer transactions to record, thus simplifying the accounting system. Some accounts are combined. For example, all in-process work is combined with raw materials to form a new account, Raw and In Process (RIP) Inventory and direct labor is also combined with other costs to form a new account titled Conversion Costs. Indirect labor is directly assigned to product cells; thus, less factory overhead is allocated to products. The cell conversion rate is similar to a predetermined factory overhead rate, except that it includes all conversion costs in the numerator.

Learning Objective 2.

4. Determine the ending balance in Raw and In Process Inventory and Finished Goods Inventory.

Raw and In Process Inventory	$
Finished Goods Inventory	$

5. Lean accounting is different from traditional accounting because it is more complex and uses maximum control. As a result, the number of transactions are increased . In many lean operations, purchased materials are charged to a raw and in process inventory account . Direct labor is frequently included as a conversion cost of the cell . Often, nonfinancial performance measures, such as lead time or quality measures , are used to monitor performance.