$($i$)($Click the icon to view additional information.$)$

The following data are for Gadget for March $2020$:

$($Click the icon to view the March data.$)$

Read the requirements.

Begin by recording the entries Outdoor Lawn would use for the current sequential tracking, starting with the purchase of direct materials.

Journal Entry

Now prepare the entry to record the conversion costs incurred

Data table

Direct materials purchased $$2,836,000$ Conversion costs incurred $$696,800$

Direct materials used $,$$$2,814,000,$ Conversion costs allocated $$750,400$

Gadget 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 $($$$105$ per unit$)$ and standard

conversion cost $($$$28$ per unit$).$ Gadget produced $26,800$ finished units in March $2020$

and sold $20,800$ units. The actual direct materials cost per unit in March $2020$ was $$105,$

and the actual conversion cost per unit was $$26.$ Any under$-$ or overallocated conversion

costs are written off monthly to Cost of Goods Sold.

Robert, the unit manager of Gadget, is concerned that switching to the backflush costing

system will lower the operating income of his unit. The senior management at

Outdoor Lawn tells Robert that this will only be the case if the standard costs continue to

be imprecise estimates of actual costs and that income will remain the same under the

proposed backflush costing system if his team can better estimate standard costs.

Assume that Robert correctly estimates the standard conversion costs to be

$$26$ and that conversion costs incurred and conversion costs allocated are

both equal to $$696,800.$ 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 Lawn is considering

Is the claim of the senior management at Outdoor Lawn correct that Gadget's

operating income will remain the same under the proposed backflush costing

system as long as the standard costs are estimated correctly?

Requirements