Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 37

Backflush Costing Chen Manufacturing uses backflush costing. Chen has the following information for the most recent month of activity:

Purchase of direct materials	$725,000
Direct materials used	$705,000
Conversion cost incurred	$1,450,000
Direct materials standard cost	$20 per unit
Conversion cost at standard	$40 per unit
Units produced	35,000 units
Units sold	33,000 units

Required

1. Prepare the journal entries for purchase of materials, conversion costs, the completion of product during the month, the sale of product, and the closing entry.

2. Under what conditions is backflush costing used in practice?

Step 1 of 4

4108-6-36E AID: 60589 | 21/08/2019