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Backflush journal entries and JIT production.
Krügsmann AG has a plant that manufactures 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 opening stocks. The following data pertain to April manufacturing:
Direct (raw) materials purchased
€8 800 000
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 the following T-accounts if applicable: Stock 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?
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