Lean Accounting

Com-Tel Inc. manufactures and assembles two models of smartphones-the Tiger Model and the Lion Model. The process consists 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 CostCategories		Budget
Labor		$104,500
Supplies		39,600
Utilities		14,300
Total		$158,400

Com-Tel plans 2,400 hours of production for the Lion Model cell for the year. The materials cost is $56 per unit. Each assembly requires 15 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:

1. Electronic parts were purchased to produce 8,150 Lion Model assemblies in May.
2. Conversion costs were applied for 7,750 units of production in May.
3. 7,600 units were completed and transferred to finished goods in May.
4. 7,370 units were shipped to customers at a price of $264 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	$