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 during purchase of raw materials will include:

a. Conversion Cost Allocated 900,000 Debit

b. Conversion Cost Allocated 900,000 Credit

c. Raw and In Process Account 1,880,000 Credit

d. Raw and In Process Account 1,880,000 Debit

2. Trigger Points Purchase, Completion & Sale: The entry during sales of units will include:

a. Cost of Goods Sold 380,000 Debit

b. Cost of Goods Sold 2,610,000 Credit

c. Finished Goods 2,610,000 Credit

d. Finished Goods 2,700,000 Debit

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

a. Accounts Payable 1,800,000 Credit

b. Conversion Cost Control 1,280,000 Debit

c. Finished Goods 2,610,000 Credit

d. Cost of Goods Sold 2,610,000 Debit