Canadian Standard Ltd. produces porcelain toilets. Data for the month of August for production of their top model, the "Canadian Standard D-Lux" is given below. The company uses JIT production and backflush costing with three trigger points for entries in the accounting system: incurrence of actual materials purchase costs completion of good output units sale of finished units Production data for August: Standard cost of 1 good unit of output: direct materials $20 (@ standard) $1,010,000 Conversion costs incurred $1,230,000 Good units of output 50,000 Units sold 47,000 REQUIRED: conversion costs $25 Raw materials purchased Prepare summary entries under backflush costing for the month of August assuming that the raw materials had additional costs as follows:
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.
Question IV – Backflush Costing
Canadian Standard Ltd. produces porcelain toilets. Data for the month of August for production of their top model, the "Canadian Standard D-Lux" is given below. The company uses JIT production and backflush costing with three trigger points for entries in the accounting system:
- incurrence of actual materials purchase costs
- completion of good output units
- sale of finished units Production data for August:
Standard cost of 1 good unit of output:
- direct materials $20
|
- conversion costs $25 Raw materials purchased
- Prepare summary entries under backflush costing for the month of August assuming that the raw materials had additional costs as follows:
Unfavourable price variance $5,000 Unfavourable efficiency variance $7,000
- Assume that all variances and underallocated or overallocated conversion costs are written off monthly to costs of Goods Sold. Prepare the pertinent
journal entry .
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