Backflush Costing Blue Water Sails, Inc. (BWS) manufactures sailcloth used by sailmakers that produce sails for sailboats. BWS’s sailcloth is the conventional polyester-based sail material and is usedwidely in recreational boating. Sailmakers throughout the world use BWS’s sailcloth. The manufactureof sailcloth has a small number of processes, and BWS integrates them carefully so that there is verylittle Work-in-Process Inventory. The product is measured in yards of cloth, which is prepared in rolls 42inches wide. Because it has little Work-in-Process Inventory, BWS also uses backflush accounting to simplify the accounting for its operations. BWS has the following information for the most recent accountingperiod. The beginning inventory of polyester fiber was $142,000, and the ending inventory was $185,000.[LO 6-8]Required1. Show the entries for manufacturing costs incurred or applied, completion of 155,000 yards of product,and the closing entries.2. Under what conditions is backflush costing used in practice? Polyester fiber purchased $710,000Conversion cost incurred $1,450,000Direct materials standard cost $4.25 per yard of clothConversion standard cost $8.50 per yard of clothUnits produced 155,000 yards of cloth
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Backflush Costing Blue Water Sails, Inc. (BWS) manufactures sailcloth used by sailmakers that produce sails for sailboats. BWS’s sailcloth is the conventional polyester-based sail material and is used
widely in recreational boating. Sailmakers throughout the world use BWS’s sailcloth. The manufacture
of sailcloth has a small number of processes, and BWS integrates them carefully so that there is very
little Work-in-Process Inventory. The product is measured in yards of cloth, which is prepared in rolls 42
inches wide. Because it has little Work-in-Process Inventory, BWS also uses backflush accounting to simplify the accounting for its operations. BWS has the following information for the most recent accounting
period. The beginning inventory of polyester fiber was $142,000, and the ending inventory was $185,000.
[LO 6-8]
Required
1. Show the entries for
and the closing entries.
2. Under what conditions is backflush costing used in practice?
Polyester fiber purchased $710,000
Conversion cost incurred $1,450,000
Direct materials standard cost $4.25 per yard of cloth
Conversion standard cost $8.50 per yard of cloth
Units produced 155,000 yards of cloth
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