Auto-Motion is a lean manufacturer of self-driving wheelchairs. The company budgets $560,000 of conversion costs and 2,000 production hours for the next year. Each wheelchair requires 30 production hours and materials costs of $4,480. The company started and completed 93 wheelchairs during the year and sold 85. Each wheelchair is sold for $17,000. Actual conversion costs equal applied conversion costs.
Required 1. Prepare journal entries to record (a) the purchase of raw materials on credit to produce 98 units, (b) applied conversion costs to the production of 93 units, (c) actual conversion costs of $781,200 (credit “Various Accounts”), (d) sale of 85 units on credit, and (e) ending inventory and cost of goods sold.
2. Compute the ending balances of Work in Process Inventory, Finished Goods Inventory, and Conversion Costs. Assume each of these inventory accounts began the year with a balance of zero.