Question: Backflush costing and JIT production. The Acton Corporation manufactures electrical meters. For August, there were no beginning inventories of direct materials and no beginning or ending work in process. Acton uses a JIT production system and backflush costing with three trigger points for making entries in the accounting system:
- Purchase of direct materials
- Completion of good finished units of product
- Sale of finished goods
Acton's August standard cost per meter is direct materials, $24, and conversion cost, $18. Acton has no direct materials variances. The following data apply to August manufacturing:
Direct material purchased $540,000 Number of finished units manufactured 19,000
Conversion costs incurred $425,000 Number of finished units sold 18,000
1. Prepare summary journal entries for August (without disposing of under- or overallocated conversion costs). Acton has 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.