Question

Backflush Costing: Variation 2 Potter Company has installed a JIT purchasing and manufacturing system and is...

Backflush Costing: Variation 2

Potter Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During the month of June, Potter had the following transactions:

Raw materials purchased $245,000
Direct labor cost 41,500
Overhead cost 208,000
Conversion cost applied 269,750*

*$41,500 labor plus $228,250 overhead.

There were no beginning or ending inventories. All goods produced were sold with a 50 percent markup. Any variance is closed to Cost of Goods Sold. (Variances are recognized monthly.)

Required:

Prepare the journal entries for the month of June using backflush costing, assuming that Potter uses the sale of goods as the second trigger point instead of the completion of goods. For a compound transaction, if an amount box does not require an entry, leave it blank. Prepare your entries in the following order: (a) purchase of raw materials, (b) incurrence of direct labor and overhead costs, (c) cost of sales, (d) sales revenue, and (e) recognition of the variance between applied and actual production costs.

a.      
b.
c.
d.
e.
  

Homework Answers

Answer #1

Answer-

Journal entries - Backflush costing
Transaction Account Titles and Explanations Debit Credit
a. Work-in-Process Inventory 245000
Cash / Accounts Payable 245000
b. 0
0
c. Finished Goods Inventory 514,750
Work-in-Process Inventory 245000
Conversion costs (Direct labor + Overheads) 269750
d. Cost of Sales 514,750
Finished Goods Inventory 514,750
e. Accounts Receivable 772,125
Sales Revenue [514,750 + (50% x 514,750)] 772,125
f. Factory overheads (228250 - 208000) 20250
Cost of Sales 20250
Note: No entry is required for b.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Backflush Costing, Conversion Rate Southward Company has implemented a JIT flexible manufacturing system. John Richins, controller...
Backflush Costing, Conversion Rate Southward Company has implemented a JIT flexible manufacturing system. John Richins, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to discontinue the detailed direct labor accounting of the past. The company has created two manufacturing cells, each capable of producing a family of products: the radiator cell and the water...
New Junior Company is a manufacturing firm that uses Job-Order costing system. On January 1, the...
New Junior Company is a manufacturing firm that uses Job-Order costing system. On January 1, the beginning of the current year, the company’s inventory balances were as follows: Raw materials $13’700 Work in process 44’000 Finished goods 32’400 The company applies cost to jobs on the basis of machine hours. For the current year, the company estimated that it would work 32’500 machine hours and incur $151’000 in manufacturing overhead costs. The following transactions were recorded for the year: a....
Prepare journal entries to record the following transactions for June using a job order costing system....
Prepare journal entries to record the following transactions for June using a job order costing system. (a) Purchased raw materials on credit, $84,000. (b) Raw materials requisitioned: $10,000 direct and $6,200 indirect. (c) Factory payroll accrued $35,000, including $12,500 indirect labor, remainder was direct labor. (d) Paid other actual overhead costs totaling $8,500 with cash. (e) Applied overhead totaling $27,600. (f) Finished and transferred jobs totaling $67,500. (g) Jobs costing $55,200 were sold on credit for $80,000.
2. During February, the following transactions were recorded at Cuenca Corporation. The company uses process costing....
2. During February, the following transactions were recorded at Cuenca Corporation. The company uses process costing. (1) Raw materials that cost $38,300 are withdrawn from the storeroom for use in the Assembly Department. All of these raw materials are classified as direct materials. (2) Direct labor costs of $21,700 are incurred, but not yet paid, in the Assembly Department. (3) Manufacturing overhead of $45,200 is applied in the Assembly Department using the department’s predetermined overhead rate. (4) Units with a...
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system...
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,297,500 in manufacturing overhead cost at an activity level of 573,000 machine-hours. The company spent the entire month of January working on a large order for 12,300 custom-made machined parts. The company had no work...
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system...
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,267,500 in manufacturing overhead cost at an activity level of 569,000 machine-hours. The company spent the entire month of January working on a large order for 12,400 custom-made machined parts. The company had no work...
JIT/Lean Production and Product Costing Presented is information pertaining to the standard or budgeted unit cost...
JIT/Lean Production and Product Costing Presented is information pertaining to the standard or budgeted unit cost of a product manufactured in a JIT/Lean Production environment at CNN Systems Inc.: Direct materials .......................................................... $40 Conversion .............................................................. 30 Total ................................................................... $70 All materials are added at the start of the production process. All raw materials purchases and conver- sion costs are directly assigned to Cost of Goods Sold. At the end of the period, costs are backed out and assigned to Raw...
Findlay Company uses a job-order costing system. The following data relate to the month of October,...
Findlay Company uses a job-order costing system. The following data relate to the month of October, the first month of the company’s fiscal year:             10/1    Raw materials purchased on account, $ 210,000.             10/7    Raw materials issued to production, $ 190,000. ( 80% direct and 20%                        indirect)             10/8    Direct labor cost issued to production, $49,000; and indirect labor cost incurred                        $21,000)             10/22 The company applies manufacturing overhead cost to production on the                        ...
Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is...
Bronfenbrenner Co. uses a standard cost system for its single product in which variable overhead is applied on the basis of direct labor hours. The following information is given: Standard costs per unit: Raw materials (1.5 grams × $16 per gram) $24.00 Direct labor (0.75 hours × $8 per hour) $6.00 Variable overhead (0.75 hours × $3 per hour) $2.25 Actual experience for current year: Units produced 22,400 units Purchases of raw materials (21,000 grams × $17 per gram) $357,000...
Granite Company uses a job-order costing system. The company applies manufacturing overhead to jobs using a...
Granite Company uses a job-order costing system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year, manufacturing overhead and direct labor-hours were estimated at $80,000 and 16,000 hours respectively, for the year. In June, Job #315 was completed. Materials costs on the job totaled $1,500 and labor costs totaled $2,400 at $6 per hour. At the end of the year, it was determined that the company worked 15,000 direct labor-hours for...