Consider the following data pertaining to March 2013 for a firm that has adopted JIT.
Production ............ 8,000 units
Sales ($ 20 per unit) ......... 7,900 units
Standard production costs
Direct material ......... $ 4
Conversion costs ........ 8
Assume that there were no cost or usage variances for March, and the quantity of material used equaled the quantity purchased. All material is purchased on account, and all units started were completed.
a. Assuming that the company uses a traditional costing system, record the journal entries to recognize the following:
1. Purchase of material
2. Incurrence of conversion costs
3. Completion of the month’s production
4. Sale of the month’s production
b. Assuming that the company initially charges all costs to Cost of Goods Sold and then uses backflush costing to assign costs to inventories at the end of the period, re-cord the journal entries to recognize the following:
1. Incurrence of conversion costs
2. Completion of production
3. Backflushing of costs to inventories