Raymore, a unit of Outdoor UnPlugged, manufactures a line of electric, cordless, lawn mowers. Senior management of Outdoor UnPlugged has noticed that Raymore has been producing more lawn mowers than it has been selling, and that the unit’s inventory has been steadily increasing. Senior management of Outdoor UnPlugged suspects that the bonus plan in place for the head of Raymore is behind this practice. Senior management of Outdoor UnPlugged is contemplating to switch from the current sequential tracking to a backflush costing system in order to stop the overproduction at Raymore. Specifically, senior management of Outdoor UnPlugged is considering a backflush costing system with the following two trigger points:

■ Purchase of direct materials
■ Sale of finished goods

Each mower takes 2 hours to assemble. There are no beginning inventories of materials or finished goods and no beginning or ending work-in-process inventories. The following data are for Raymore for March 2020:

Direct materials purchased $1,550,000 Conversion costs incurred $901,000
Direct materials used $1,530,000 Conversion costs allocated $884,000

Raymore records direct materials purchased and conversion costs incurred at actual costs. It has no direct materials variances. When finished goods are sold, the backflush costing system “pulls through” standard direct materials cost ($90 per unit) and standard conversion cost ($52 per unit). Raymore produced 17,000 finished units in March 2020 and sold 16,800 units. The actual direct materials cost per unit in March 2020 was $90, and the actual conversion cost per unit was $53. Any under- or overallocated conversion costs are written off monthly to Cost of Goods Sold.

Required:
1. Following Exhibit 21-8, prepare summary journal entries for March 2020 and post the entries to applicable T-accounts for both methods the current sequential tracking and the backflush costing that senior management of Outdoor UnPlugged is considering.

Data from Exhibit 21-8:

2. Refer to your answer in requirement 1. How is operating income going to differ under backflush costing compared to the current sequential tracking?
3. Do you think that switching to the backflush costing system is going to accomplish the goal of Outdoor UnPlugged’s senior management to stop the overproduction at Raymore?

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EXHIBIT 21-8 PANEL A: Journal Entries Journal Entries and General Ledger Overview for Backflush Costing and Journal Entries for Sequential Tracking With Two Trigger Points: Purchase of Direct Materials and Sale of Finished Goods (Example 2) Backflush Costing Stage A: Record Purchase of Direct Materials and Incurring of Conversion Costs 1. Record Direct Materials Purchased Entry (A1) Inventory: Control Accounts Payable Control 2. Record Conversion Costs Incurred Entry (A2) Conversion Costs Control Various accounts (such as Wages Payable Control) Stage B: Record Production Resulting in Work in Process Entry (B1) No Entry Recorded Stage C: Record Cost of Good Finished Units Completed Entry (C1) No Entry Recorded 2. Record Underallocated or Overallocated Conversion Costs Entry (D2) Conversion Costs Allocated Cost of Goods Sold 1,950,000 Conversion Costs Control 1,260,000 3,069,000 1,950,000 1,188,000 72,000 1,260,000 Stage D: Record Cost of Finished Goods Sold (and Under-or Overallocated Conversion Costs) 1. Record Cost of Finished Goods Sold Entry (D1) Cost of Goods Sold Inventory Control Conversion Costs Allocated 1,881,000 1,188,000 1,260,000 Materials Inventory Control Accounts Payable Control Sequential Tracking Conversion Costs Control Various accounts (such as Wages Payable Control) Work-in-Process Control Materials Inventory Control Conversion Costs Allocated Finished Goods Control Work-in-Process Control Cost of Goods Sold Finished Goods Control Conversion Costs Allocated Cost of Goods Sold Conversion Costs Control 1,950,000 1,260,000 3,100,000 3,100,000 3,069,000 1,200,000 60,000 1,950,000 1,260,000 1,900,000 1,200,000 3,100,000 3,069,000 1,260,000