JIT Accounting: Quad Cities Precision Instruments produces sensitive heat measurement devices. The units are produced in three

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JIT Accounting: Quad Cities Precision Instruments produces sensitive heat measurement devices. The units are produced in three manufacturing stages: (1) meter assembly. (2) case assembly, and (3) testing. The company has a large backlog of orders and had no beginning inventories because all units in production last year were sold by the end of the year. At the start of this year, an order was received for 4,000 meters. The company purchased $260,000 of materials on account. The meter assembly division used $210,000 of the materials in production. The case assembly division used $40,000, and the testing division used $10,000.

Direct labor costs of $640,000 were incurred. These costs were assigned as follows: meter assembly, $200,000; case assembly, $350,000; testing, $90,000. Over- head costs of $1,040,000 were incurred and charged to departments based on materials used.

Ninety percent of the costs charged to meter assembly were transferred to case assembly during the period. Ninety-five percent of the costs charged to case assembly (including the costs transferred in from meter assembly) were transferred to testing. All of the costs charged to testing were transferred to finished goods, and all of the finished units were delivered to the buyer. There were no manufacturing cost variances.

Required:

a. Use T-accounts to show the flow of costs under a traditional costing system.

b. Use T-accounts to show the flow of costs using a JIT system.

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Cost Accounting

ISBN: 9780256069198

3rd Edition

Authors: Edward B. Deakin, Michael Maher

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