Backflush costing and JIT production. Road Warrior Corp. assembles hand-held comput ers that have scaled-down capabilities of
Question:
Backflush costing and JIT production. Road Warrior Corp. assembles hand-held comput¬
ers that have scaled-down capabilities of laptop computers. Each hand-held computer takes 6 hours to assemble. Road Warrior uses a just-in-time production system and a backflush costing system with three trigger points:
Purchase of direct (raw) materials Completion of good finished units of product Sale offinished goods There are no beginning inventories of materials or finished goods. The following data are for August 2007:
Direct (raw) materials purchased $3,304,800 Direct (raw) materials used 3,280,320 Conversion cost incurred 868,320 Conversion costs allocated 900,480 Road Warrior records direct materials purchased and conversion costs incurred at actual costs. When finished goods are sold, the backflush costing system “pulls through” standard direct materials costs ($122.40 per unit) and standard conversion costs ($33.60 per unit)..
It produced 26,800 finished goods units in August 2007 and sold 26,400 units. The actual direct materials cost per unit in August 2007 was $122.40 while the actual conversion cost per unit was $32.40.
Required !• Prepare summary journal entries for August 2007 (without disposing of underallocated or overallocated conversion costs).
2. Post the entries in requirement 1 to T-accounts for applicable Inventory: Raw and In-Process, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods hold.
3. Under an ideal JIT production system, how would the amounts in your journal entries differ from those in requirement 1 ?
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780131971905
4th Canadian Edition
Authors: Charles T. Horngren, George Foster, Srikant M. Datar, Howard D. Teall