W Corporation assembles handheld computers. Each handheld computer takes six hours to assemble. The following data are for August 2018: Direct materials purchased $2,650,000 Conversion costs incurred $450,000 Direct materials used $2,500,000 Conversion costs allocated $500,000 W records direct materials purchased and conversion costs incurred at actual costs. It has no direct materials variances. When finished goods are sold, the backflush costing system “pulls through” standard direct material cost ($100 per unit) and standard conversion cost ($20 per unit). W produced 25,000 finished units in August 2018 and sold 24,500 units. The actual direct material cost per unit in August 2018 was $100, and the actual conversion cost per unit was $19. Required 1- Assume W uses a JIT production system and a backflush costing system with three trigger points: _ Purchase of direct materials and incurring of conversion costs _ Completion of good finished units of product _ Sale of finished goods Prepare journal entries for August including the disposition of under- or over allocated conversion costs. Required 2- Assume W uses a backflush costing system with the following two trigger points: _ Purchase of direct materials and incurring of conversion costs _ Sale of finished goods Prepare journal entries for August, including the disposition of under- or over allocated conversion costs. 3- Assume W uses only two trigger points, Completion of good finished units of product and Sale of finished goods. Any under- or over allocated conversion costs are written off monthly to Cost of Goods Sold. Prepare journal entries for August, including the disposition of under- or over allocated conversion costs.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
W Corporation assembles handheld computers. Each handheld computer takes six hours to assemble. The following data are for August 2018:
Direct materials purchased $2,650,000 Conversion costs incurred $450,000
Direct materials used $2,500,000 Conversion costs allocated $500,000
W records direct materials purchased and conversion costs incurred at actual costs. It has no direct materials variances. When finished goods are sold, the backflush costing system “pulls through” standard direct material cost ($100 per unit) and
Required
1- Assume W uses a JIT production system and a backflush costing system with three trigger points:
_ Purchase of direct materials and incurring of conversion costs
_ Completion of good finished units of product
_ Sale of finished goods
Prepare
Required
2- Assume W uses a backflush costing system with the following two trigger points:
_ Purchase of direct materials and incurring of conversion costs
_ Sale of finished goods
Prepare journal entries for August, including the disposition of under- or over allocated conversion costs.
3- Assume W uses only two trigger points, Completion of good finished units of product and Sale of finished goods. Any under- or over allocated conversion costs are written off monthly to Cost of Goods Sold.
Prepare journal entries for August, including the disposition of under- or over allocated conversion costs.
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