JUST IN TIME SYSTEM AND BACKFLUSH ACCOUNTING

Sillicon Valley Corporation (SVC), which produces keyboards for personal computers. We assume the following information for SVC for the month of April.

• There are no beginning inventories of direct materials. Moreover, there is zero beginning and ending work in process.
• SVC has only one direct manufacturing cost strategy (direct materials) and one indirect manufacturing cost category (conversion costs). All manufacturing labor costs are included in conversion costs.
• From its bill of materials and an operations list, SVC determines that direct material cost per keyboard unit is P20 and estimated conversion cost is P10.
• SVC purchases P1,880,000 of direct materials. Actual conversion costs equal P1,280,000. SVC produces 90,000 good keyboard units and sells 87,000 units.
• Any under allocated or over allocated conversion costs are written off to Cost of goods sold at the end of the month.

Multiple Choices:

1. Trigger Points Purchase, Completion & Sale: The entry to adjust cost of goods sold by the end of the period will include:

a. Conversion Cost Control 1,280,000 Debit

b. No Entry

c. Conversion Cost Allocated 900,000 Debit

d. Cost of Goods Sold 1,280,000 Debit

2. Trigger Points Completion & Sale: The adjusting entry at the end of the period will include:

a. Conversion Cost Control 1,280,000 Debit

b. No Entry

c. Conversion Cost Allocated 900,000 Credit

d. Cost of Goods Sold 380,000 Debit

3. Trigger Points Completion & Sale: The entry to record sale of goods will include:

a. Cost of Goods Sold 380,000 Debit

b. No Entry

c. Finished Goods 2,610,000 Credit

d. Finished Goods 2,610,000 Debit