Chapter 20, Problem 20.27E

Backflush costing and JIT production. Grand Devices Corporation assembles handheld computers that have scaled-down capabilities of laptop computers. Each handheld computer takes 6 hours to assemble. Grand Devices uses a JIT production system and a backflush costing system with three trigger points:

• Purchase of direct materials
• Completion of good finished units of product
• Sale of finished goods

There are no beginning inventories of materials or finished goods and no beginning or ending work-in-process inventories. The following data are for August 2017:

Grand Devices 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 materials cost ($102 per unit) and standard conversion cost ($28 per unit). Grand Devices produced 28,800 finished units in August 2017 and sold 28,400 units. The actual direct materials cost per unit in August 2017 was $102, and the actual conversion cost per unit was $27.

1. 1. Prepare summary journal entries for August 2017 (without disposing of under- or overallocated conversion costs).

Required

1. 2. Post the entries in requirement 1 to T-accounts for applicable Materials and In-Process Inventory Control, Finished Goods Control, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods Sold.
2. 3. Under an ideal JIT production system, how would the amounts in your journal entries differ from those in requirement 1?