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Activity in Just in Time Problem Solving With Answers

The document summarizes the production process for two companies - Nite Lite and Decorations for Every Occasion. It provides information on their production budgets, material costs, production units, process times, and calculations for value added time, non-value added time and total lead time for both companies' old and new production methods. Journal entries are also provided for Nite Lite's material purchases, conversion costs and finished goods.

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Lucy Heartfilia
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613 views2 pages

Activity in Just in Time Problem Solving With Answers

The document summarizes the production process for two companies - Nite Lite and Decorations for Every Occasion. It provides information on their production budgets, material costs, production units, process times, and calculations for value added time, non-value added time and total lead time for both companies' old and new production methods. Journal entries are also provided for Nite Lite's material purchases, conversion costs and finished goods.

Uploaded by

Lucy Heartfilia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

The Nite Lite Company has budgeted its conversion cost for the small lamp production as P58,000 for
1,200 production hours. Each unit produced by the cell requires 20 minutes of process time. During
the month, 3,500 units are manufactured in the cell. the estimated material costs per unit is P17.00.
Provide the following journal entries.

(a) Materials are purchased to produce 3,600 units.


(b) Conversion costs are applied to3,500 units of production.
(c) 3,400 units are placed into finished goods.
ANS:
(a)
Raw and in process inventory 61,200
Accounts Payable 61,200
(17.00 per unit x 3,600 units )

(b)
Raw and in process inventory 56,389
Conversion costs 56,389
[(58,000 / 1,200 hours) / (60 min. / 20
min)] = $16.11
(16.11 x 3,500 units ) = 56,389

(c)
Finished Goods Inventory 112,574
Raw and in process inventory 112,574
(17 + 16.11) x 3,400 units
2. Decorations for Every Occasion makes wreaths in batches of 12 at a time. The cutting process takes 4
minutes per wreath, the assembly process is 6 minutes per wreath, and the decorating process time is
7 minutes per wreath. It takes 5 minutes to move the wreaths from the cutting process to the
assembly process. The cutting and assembly process are done at the same time, but only one wreath
can be decorated at a time.

In a effort to improve the lead time, the company has tried reducing the batch size to 8 units. The
new process is as follows: cutting process - 3 minutes, assembly process - 4 minutes, and the
decorating process is still 7 minutes per wreath. It takes 5 minutes to move the wreaths from the
cutting process to the assembly process. The cutting and assembly process are done at the same time,
but only one wreath can be decorated at a time.

(a) Compute the value added, nonvalue added, and the total lead time of the wreath process for both
the old and the new manufacturing process.

(b) Compute the value added ratio. Round to the nearest decimal.
ANS:
(a) Old:
Value added lead time: 4 + 6 + 7 = 17
Nonvalue added lead time:
Move time 5
Within batch wait time (7 min. x (12-1)) 77
Total Lead Time 99

New:
Value added lead time: 3 + 4 + 7 = 14
Nonvalue added lead time:
Move time 5
Within batch wait time (7 min. x (8-1)) 49
Total Lead Time 68

(b) Value Added Ratio (old process) = 17 / 99 = 17.2%


Value Added Ratio (new process) = 14 / 68 = 20.5%

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