Grand Prix Displays Inc. manufactures and assembles automobile instrument panels

Question

Grand Prix Displays Inc. manufactures and assembles automobile instrument panels for both Yokohama Motors and Detroit Motors. The process

A sequence of activities linked together for performing a particular task.

consists of a lean product cell for each customer’s instrument assembly. The data that follow concern only the Yokohama lean cell.

For the year, Grand Prix Displays Inc. budgeted the following costs for the Yokohama production cell:

Question not attempted.

1

Conversion Cost Categories

Budget

2

Labor

$758,000.00

3

Supplies

45,000.00

4

Utilities

29,000.00

5

Total

$832,000.00

Grand Prix Displays Inc. plans 2,600 hours of production for the Yokohama cell for the year. The materials cost is $150 per instrument assembly. Each assembly requires 15 minutes of cell assembly time. There was no November 1 inventory for either Raw and In Process Inventory

The capitalized cost of direct materials purchases, labor, and overhead charged to the production cell.

or Finished Goods Inventory.

The following summary events took place in the Yokohama cell during November:

The combination of direct labor and factory overhead costs.

1

Conversion Cost Categories

Budget

2

Labor

$758,000.00

3

Supplies

45,000.00

4

Utilities

29,000.00

5

Total

$832,000.00

Explanation / Answer

1) Budgeted Cell Conversion Cost Rate = Budgeted Cost/Hours of Production Budgeted Cell Conversion Cost Rate = $832,000/2600 hours $320 per hour 2) Budgeted Cell Conversion Cost per Unit $320 per hr x (15 min. ÷ 60 min.) $80 Per unit 3) Journal Entries Nov.2 Debit Credit Raw and In Process Inventory $1,320,000               Accounts Payable (8800 units x $150) $1,320,000 Nov.6 Raw and In Process Inventory $688,000               Conversion Cost (8600 units x $80) $688,000 Nov. 24 Finished Goods Inventory $1,932,000              Raw and In Process Inventory (8400 units x ($150 + $80) $1,932,000 Nov.29 Accounts Receivable (8340 units x $420) $3,502,800                          Sales $3,502,800 Cost of Goods Sold $1,918,200                  Finished Goods Inventory (8340 units x ($150 + $80) $1,918,200 4) Ending balance in Raw and In Process Inventory $1,320,000 + $688,000 - $1,932,000 $76,000 Ending Balance in Finished Goods Inventory $1,932,000 - $1,918,200 $13,800

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