Right Now Video Inc. uses a lean manufacturing strategy to manufacture DVR (digi

Question

Right Now Video Inc. uses a lean manufacturing strategy to manufacture DVR (digital video recorder) players. The company manufactures DVR players through a single product cell. The budgeted conversion cost for the year is $420,000 for 2,000 production hours. Each unit requires 9 minutes of cell process time. During July, 1,100 DVR players are manufactured in the cell. The materials cost per unit is $135. The following summary transactions took place during July:

Journalize the summary transactions for July. Refer to the Chart of Accounts for exact wording of account titles.

Interest Expense

Jul. 1 Materials are purchased for July production. 3 Conversion costs were applied to production. 15 1,100 DVR players are assembled and placed in finished goods. 25 1,060 DVR players are sold for $335 per unit.

Explanation / Answer

Budgeted Conversion Cost $420,000.00 Budgeted Production Hrs. 2000 A Budgeted Conversion cost per Hrs. $210.00 Time required per unit 9 minutes B Budgeted Conversion cost per Unit $31.50 Date Account Title Debit Credit 1-Jul Raw Material Inventory $148,500.00     Account Payble $148,500.00 (to record purchase of inventory) WIP Inventory $148,500.00        Raw Material Inventory $148,500.00 (to record issue of material for production) 3-Jul WIP Inventory $34,650.00        Conversion cost $34,650.00 (Conversion cost applied) 15-Jul Finished Goods Inventory $183,150.00       WIP Inventory $183,150.00 Cost of Slaes $176,490.00                 Finished Goods Inventory $176,490.00 Finished Goods Inventory $176,490.00            Sales $355,100.00            Costing P/L $178,610.00

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