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 materials purchased $540,000 Number of finished units manufactured 19,000 Conversion costs incurred $425,000 Number of finished units sold 18,000 Assume the same facts for Acton Corporation , except that now assume Acton uses a JIT production system and backflush costing with two trigger points for making entries in the accounting system: ■ Purchase of direct materials ■ Sale of finished goods The inventory account is confined solely to direct materials, whether these materials are in a storeroom, in work in process, or in finished goods. No conversion costs are inventoried. They are allocated to the units sold at standard costs. Any under- or overallocated conversion costs are written off monthly to Cost of Goods Sold. Q. Prepare summary journal entries for August, including the disposition of under- or overallocated conversion costs. Acton has no direct materials variances.
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.
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
Direct materials purchased $540,000
Number of finished units manufactured 19,000
Conversion costs incurred $425,000
Number of finished units sold 18,000
Assume the same facts for Acton Corporation , except that now assume Acton uses a JIT production system and backflush costing with two trigger points for making entries in the accounting system:
■ Purchase of direct materials
■ Sale of finished goods
The inventory account is confined solely to direct materials, whether these materials are in a storeroom, in work in process, or in finished goods. No conversion costs are inventoried. They are allocated to the units sold at standard costs. Any under- or overallocated conversion costs are written off monthly to Cost of Goods Sold.
Q. Prepare summary
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