Question 1

Answer the following questions using the information below:
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing.
 $\begin{array}{lr}
\text { Conversion costs - March } & \$ 400,000 \
\text { Direct materials purchased - March } & \$ 1,070,000 \
\text { Units produced - March } & 58,800 \
\text { Units sold - March } & 41,800
\end{array}$
-Which of the following entries properly records the cost of goods sold for the month?

A) $\begin{array} { l  }
 \text {Finished Goods  }&1,045,000 \
 \text {Work in Process }&1,045,000 \
\end{array}$

B) $\begin{array} { l  }
 \text {Cost of Goods Sold }&1,045,000 \
 \text { Finished Goods}&1,045,000 \
\end{array}$

C) $\begin{array} { l  }
 \text {Finished Goods }&1,045,000 \
 \text { Cost of Goods Sold}&1,045,000 \
\end{array}$

D) $\begin{array} { l  }
 \text {Cost of Goods Sold }&1,045,000 \ \text {Work in Process }& 1,045,000\
\end{array}$

Accepted Answer

Cost of Goods Sold is debited for the cost of goods sold, and Finished Goods is credited for the cost of goods transferred out of Finished Goods.

Question 2

Which of the following statements best defines a trigger point in a sequential-tracking costing system?
A) the inventory level at which a new purchase order is generated
B) the point at which the sum of annual relevant stockout and ordering costs is minimal
C) the production level at which the costing system becomes incapable of tracking the production costs
D) a stage in the production cycle at which journal entries are made in the accounting system

Accepted Answer

The answer of Which of the following statements best defines...

Question 3

The journal entry to dispose of the difference between actual conversion costs incurred and standard conversion costs allocated is different under backflush costing and sequential tracking.

Accepted Answer

The journal entry to dispose of the difference between actual conversion costs incurred and standard conversion costs allocated is exactly the same under backflush costing and sequential tracking.

Question 4

Which of the following statements is true of a backflush costing system?
A) All costs are tracked sequentially as products pass through each stage of production.
B) When inventories are minimal, as in JIT production systems, backflush costing complicates costing systems.
C) Usage of a backflush costing system can result in incomplete accounting records.
D) Backflush costing increases the ability of the accounting system to pinpoint the uses of resources at each step in the production process.

Accepted Answer

Backflush costing can result in incomplete accounting records because it delays recording costs until after production is completed, which may omit detailed tracking of costs through each production stage.

Question 5

To comply with GAAP,backflush cost numbers can be adjusted by recording a journal entry.

Accepted Answer

Backflush cost accounting is a method that is used to simplify the cost accounting process by waiting until the end of a production cycle to record all of the associated costs. However, this may not always comply with GAAP, so adjustments may need to be made through a journal entry to ensure proper accounting practices.

Question 6

Corry Corporation manufactures filters for cars,vans,and trucks.A backflush costing system is used and standard costs for a filter are as follows:
 $$\begin{array} { | l | r| } 
\hline \text { Direct materials } & \$ 2.60 \
\hline \text { Conversion costs } & \underline { 4.20 } \
\hline \text { Total } & \$ 6.80 \
\hline
\end{array}$$ Filters are scheduled for production only after orders are received,and are shipped immediately upon completion.This results in product costs being charged directly to cost of goods sold.In December,3,000 filters were produced and shipped.Materials were purchased at a cost of $8,450 and actual conversion costs of $13,650 were recorded.
Required:
Prepare journal entries to record December's costs for the production of the filters.

Accepted Answer

The answer of Corry Corporation manufactures filters for cars,vans,and trucks.A...

Question 7

Answer the following questions using the information below:
Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold.
 $\begin{array}{lr}
\text { Conversion costs - May } & \$ 100,625 \
\text { Direct materials purchased - May } & \$ 253,575 \
\text { Units produced - May } & 80,500 \text { units } \
\text { Units sold - May } & 77,500 \text { units } \
\text { Selling price } & \$ 20 \text { each }
\end{array}$
-Which of the following journal entries properly reflects the purchase of materials under backflush costing? 
A) $\begin{array} { l  }
 \text {Inventory Control }&\$253,575 \
 \text { accounts payable control}&\$253,575 \
\end{array}$

B) $\begin{array} { l  }
 \text {Accounts Payable Control }&\$ 253,575\
 \text { Allocated Costs: Direct Materials}&\$ 253,575\
\end{array}$

C) $\begin{array} { l  }
 \text {Accounts Payable Control  }&\$253,575 \
 \text { Materials Inwentorw}&\$253,575 \
\end{array}$

D) $\begin{array} { l  }
 \text {Allocated Costs: Direct Materials}&\$253,575 \
 \text { Inventorv: Raw and Material}&\$ 253,575\
\end{array}$

Accepted Answer

Under backflush costing, materials are recorded directly into inventory when purchased, reflecting the entry in choice A.

Question 8

Answer the following questions using the information below:
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing.
 $\begin{array}{lr}
\text { Conversion costs - March } & \$ 400,000 \
\text { Direct materials purchased - March } & \$ 1,070,000 \
\text { Units produced - March } & 58,800 \
\text { Units sold - March } & 41,800
\end{array}$
-Which of the following journal entries properly records the purchase of direct materials?

A)$\begin{array} { l  }
 \text {Accounts Payable Control }&\$1,070,000 \
 \text { Inventory: Raw and In-Process Control}&\$1,070,000 \
\end{array}$
 
B)$\begin{array} { l  }
 \text {Inventory: Raw and In-Process Control }&\$1,070,000 \
 \text {Accounts Pavable Control}&\$ 1,070,000\
\end{array}$
 
C)$\begin{array} { l  }
 \text {Inventory: Raw and In-Process Control }&\$1,070,000 \
 \text {Conversion Costs }&\$1,070,000 \
\end{array}$
 
D)$\begin{array} { l  }
 \text { Conversion Costs}&\$1,070,000 \
 \text { Inventory: Raw and In-Process Control}&\$1,070,000 \
\end{array}$

Accepted Answer

The correct journal entry for the purchase of direct materials is to debit Inventory: Raw and In-Process Control and credit Accounts Payable Control. This reflects the increase in inventory and the liability to pay for the materials.

Question 9

The accounting procedures in a backflush-costing system strictly adhere to Generally Accepted Accounting Principles (GAAP).

Accepted Answer

Backflush-costing system does not strictly adhere to GAAP as it does not track actual costs and uses estimated costs for accounting purposes. It is typically used for cost management and decision-making rather than financial reporting.

Question 10

Just-in-time costing system is a costing system that omits recording some or all of the journal entries relating to the stages from purchase of direct materials to the sales of finished goods.

Accepted Answer

The answer of Just-in-time costing system is a costing system...

Question 11

A positive aspect of backflush costing is the presence of the visible audit trail.

Accepted Answer

In backflush costing, the visible audit trail diminishes.

Question 12

Answer the following questions using the information below:
Vision Company manufactures digital cameras. For May, there were no beginning inventories of direct materials and no beginning or ending work-in -process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold.
 $\begin{array}{lr}
\text { Conversion costs - May } & \$ 100,625 \
\text { Direct materials purchased - May } & \$ 253,575 \
\text { Units produced - May } & 80,500 \text { units } \
\text { Units sold - May } & 77,500 \text { units } \
\text { Selling price } & \$ 20 \text { each }
\end{array}$
-Which of the following journal entries would be recorded when units are sold for the month under backflush costing? ? 
A)$\begin{array} { l  }
 \text {Cost of Goods Sold }&\$341,000 \
 \text { Inventory: Raw and In-Process}&\$341,000 \
\end{array}$
 
B)$\begin{array} { l  }
 \text {Cost of Goods Sold }&\$341,000 \
 \text { Inventory Control }&\$244,125 \
 \text {Conversion Costs Allocated }&\$96,875 \
\end{array}$
 
C)$\begin{array} { l  }
 \text {Inventory Inventory Control  }&\$244,125 \
 \text { Conversion Costs Allocated }&\$96,875 \
 \text {Cost of Goods Sold }&\$341,000 \
\end{array}$
 
D)$\begin{array} { l  }
 \text { Cost of Goods Sold}&\$ 354,200\
 \text {Inventory: Raw and In-Process }&\$253,575\
 \text {Conversion Costs Allocated }&\$96,875 \
\end{array}$

Accepted Answer

The cost of goods sold is calculated as the sum of direct materials and conversion costs for the units sold. Direct materials cost for 77,500 units is $\$253,575 \times \frac{77,500}{80,500} = \$244,125$. Conversion costs for 77,500 units is $\$100,625 \times \frac{77,500}{80,500} = \$96,875$. Total cost of goods sold is $\$244,125 + \$96,875 = \$341,000$.

Question 13

Tornado Electronics manufactures stereos.All processing is initiated when an order is received.For April there were no beginning inventories.Conversion Costs and Direct Materials are the only manufacturing cost accounts.Direct Materials are purchased under a just-in-time system.Backflush costing is used with a finished goods trigger point.Additional information is as follows:
 $$\begin{array} { | l | r | } 
\hline \text { Actual conversion costs } & \$ 232,000 \
\hline \text { Standard materials costs per unit } & 60 \
\hline \text { Standard conversion cost per unit } & 140 \
\hline \text { Units produced } & 3,200 \
\hline \text { Units sold } & 2,800 \
\hline
\end{array}$$ Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.

Accepted Answer

The answer of Tornado Electronics manufactures stereos.All processing is initiated...

Question 14

If the two trigger points are completion of good finished units of product and sale of finished goods,which of the following entries would be used to record cost of finished units completed under backflush costing? 
A)$\begin{array} { l  }
 \text {Finished Goods }&\$ 341,000\
 \text { Inventory Control}&\$ 244,125\
 \text {Contersion Costs Allocated }&\$96,875 \
\end{array}$
 
B)$\begin{array} { l  }
 \text {Finished Good }&\$ 354,200\
 \text {Inventory: Raw Materials }&\$253,575 \
 \text {Conwersion Costs allocated }&\$100,625 \
\end{array}$
 
C)$\begin{array} { l  }
 \text {Finished Goods }&\$354,200 \
 \text {Accounts Payable Control }&\$253,575 \
 \text {Conversion Costs Allocated }&\$100,625 \
\end{array}$
 
D)$\begin{array} { l  }
 \text {Inventory Inventory Control  }&\$244,125 \
 \text { Conversion Costs Allocated }&\$96,875 \
 \text {Finished Good }&\$341,000 \
\end{array}$

Accepted Answer

The answer of If the two trigger points are completion...

Question 15

Vision Enterprises manufactures converter boxes for high definition TVs.All processing is initiated when an order is received.For March there were no beginning inventories.Conversion Costs and Direct Materials are the only manufacturing cost accounts.Direct Materials are purchased under a just-in-time system.Backflush costing is used with a finished goods trigger point.Additional information is as follows:
 $$\begin{array} { | l | r | } 
\hline \text { Actual conversion costs } & \$ 435,000 \
\hline \text { Standard materials costs per unit } & 115 \
\hline \text { Standard conversion cost per unit } & 85 \
\hline \text { Units produced } & 7,900 \
\hline \text { Units sold } & 7,600 \
\hline
\end{array}$$ Required:
Record all journal entries for the monthly activities related to the above transactions if backflush costing is used.

Accepted Answer

The answer of Vision Enterprises manufactures converter boxes for high...

Question 16

Under backflush costing approach,the purchase of materials is ________.
A) credited to the Materials and In-Process Inventory Control account
B) debited to the Materials and In-Process Inventory Control account
C) debited to the Materials Inventory Control account
D) credited to the Materials Inventory Control account

Accepted Answer

Under backflush costing approach, the purchase of materials is debited to the Materials and In-Process Inventory Control account. This is because backflush costing defers material accounting until the end of the production process, when the actual usage of materials can be accurately determined. Therefore, the debits to the Materials and In-Process Inventory Control account represent the cost of the materials used in production, and credits will be made to this account when the finished goods are produced.

Question 17

Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers totally different to what a sequential costing approach would report.

Accepted Answer

Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers similar to what a sequential costing approach would report.

Question 18

In a backflush-costing system,no record of work in process appears in the accounting records.

Accepted Answer

In a backflush-costing system, accounting records are updated only when products are completed and shipped, and not during the production process. Therefore, there is no WIP inventory recorded in the system.

Question 19

A firm using a backflush costing system will always use actual costs rather than standard costs.

Accepted Answer

A firm using a backflush costing system can use standard costs as well as actual costs.

Question 20

Answer the following questions using the information below:
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing.
 $\begin{array}{lr}
\text { Conversion costs - March } & \$ 400,000 \
\text { Direct materials purchased - March } & \$ 1,070,000 \
\text { Units produced - March } & 58,800 \
\text { Units sold - March } & 41,800
\end{array}$
-Which of the journal entries properly records conversion costs? 
A) $\begin{array} { l  }
 \text {Conversion Costs  }&400,000\
 \text {Various Accounts }&400,000 \
\end{array}$

B) $\begin{array} { l  }
 \text { Various Accounts}&400,000 \
 \text { Conversion Costs }&400,000 \
\end{array}$

C) $\begin{array} { l  }
 \text {Conversion Costs }&400,000\
 \text {Inventory: Direct Materials }&400,000 \
\end{array}$

D) $\begin{array} { l  }
 \text {Inventory: Direct Materials  }&400,000\
 \text {Conversion Costs }&400,000 \
\end{array}$

Accepted Answer

In backflush costing, conversion costs are recorded as incurred. The journal entry debits Conversion Costs and credits Various Accounts to reflect the allocation of these costs.

Quiz 20: Inventory Management, just-In-Time, and Simplified Costing Methods

Which of the following statements best defines a trigger point in a sequential-tracking costing system?