Reference no: EM132780178
Question - Backflush journal entries and JIT production
The Lim Company has a plant that manufacturers transistor radios. The production time is only a few minutes per unit. The company uses a just-in- time production system and a backflush costing system with two trigger points for journal entries: Purchase of direct (raw) materials Completion of good finished units of product There are no beginning inventories. The following data pertain to April manufacturing:
Direct (raw) materials purchased P8,800,000
Direct (raw) materials used 8,500,000
Conversion costs incurred 4,220,000
Allocation of conversion costs 4,000,000
Costs transferred to finished goods 12,500,000 Cost of goods sold 11,900,000
Required -
1. Prepare summary journal entries for April (without disposing of under- or overallocated conversion costs). Assume no direct materials variances.
2. Post the entries in requirement 1 to T-accounts for applicable Inventory Control, Conversion Costs Control, Conversion Costs Allocated and Cost of Goods Sold.
3. Under an ideal JIT production system, how would the amounts in your journal entries differ from those in requirement 1?