Example 1 On JIT & Backflush Costing System

The Rippel Corporation manufactures electrical meters. For August, there were no ™
beginning inventories of direct materials and no beginning or ending work in
process. Rippel uses a JIT production system and backflush costing with three trigger
points for making entries in the accounting system:

- Purchase of direct materials and incurring of conversion costs ™

_ Completion of good finished units of product ™

_ Sale of finished goods ™

Rippel’s August standard cost per meter is direct material, $26, and conversion cost, ™
$19. Rippel has no direct materials variances. The following data apply to August
manufacturing:

Direct materials purchased $546,000 Number of finished units manufactured 20,000

Conversion costs incurred $399,000 Number of finished units sold 19,000.

Require ™

1. Prepare summary journal entries for August (without disposing of under- or over ™
allocated conversion costs). Assume no direct materials variances.

2. Post the entries in requirement 1 to T-accounts for Materials and In-Process ™

Inventory Control, Finished Goods Control, Conversion Costs Control, Conversion
Costs Allocated, and Cost of Goods Sold.

Solution ™

1- ™

(a) Record purchases of direct Materials and In-Process Inventory Control 546,000
materials Accounts Payable Control 546,000
(b) Record conversion costs Conversion Costs Control 399,000
incurred Various Accounts (such as Wages Payable Control) 399,000
(c) Record cost of good Finished Goods Controla 900,000
finished units completed Materials and In-Process
a
Inventory Control 520,000
a
Conversion Costs Allocated 380,000
(d) Record cost of finished Cost of Goods Soldb 855,000
goods sold Finished Goods Control 855,000
a
20,000 × ($26 + $19) = $900,000; ™

20,000 × $26 = $520,000; ™

20,000 × $19 = $380,000 ™

b
19,000 × ($26 + $19) = $855,000 ™

2-

Example 2 On JIT & Backflush Costing System

™ Assume the same facts as in EX.1 except now there are only two trigger points:

™ - Purchase of direct materials.

™ - sale of finished goods

™ Require

™ 1. Prepare summary journal entries for August, including the disposition of under- or
over allocated conversion costs. Assume no direct materials variances.

™ 2. Post the entries in requirement 1 to T-accounts for Inventory Control, Conversion

Costs Control, Conversion Costs Allocated, and Cost of Goods Sold.
 Solution

1-

(a) Record purchases of

Inventory Control 546,000
direct materials
Accounts Payable Control 546,000
(b) Record conversion costs Conversion Costs Control 399,000
incurred Various Accounts (such as Wages Payable Control) 399,000
(c) Record cost of good No entry
finished units completed
(d) Record cost of finished Cost of Goods Soldb 855,000
goods sold Inventory Control 494,000
a
Conversion Costs Allocated 361,000
(e) Record underallocated or Conversion Costs Allocated 361,000
overallocated conversion Cost of Goods Sold 38,000
costs Conversion Costs Control 399,000

™ a19,000 × ($26 + $19) = $855,000;

™ 19,000 × $26 = $494,000;

™ 19,000 × $19 = $361,000

2-