(Backflush costing) Consider the following data pertaining to March 2006 for a firm that has adopted JIT.

Assume that there were no cost or usage variances for March, and the amount of materials used equaled the quantity purchased. All materials are purchased on account, and all units started were completed.

a. Assuming that the company uses a traditional costing system, record the journal entries to recognize the following:
1. purchase of materials.
2. incurrence of conversion costs.
3. completion of the month’s production.
4. sale of the month’s production.

b. Assuming that the company initially charges all costs to Cost of Goods Sold and then uses backflush costing to assign costs to inventories at the end of the period, record the journal entries to recognize the following:
1. incurrence of conversion costs.
2. completion of production.
3. backflushing of costs to inventories.

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Production Sales ($20 per unit) Standard production costs Direct material Conversion costs 4,000 units 3,950 units $98 $4 $8