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

Exercise 38

Backflush Costing Grand Marine Inc. (GMI) manufactures sailcloth used by sailmakers that produce sails for sailboats. GMI’s sailcloth is the conventional polyester-based sail material and is used widely in recreational boating. Sailmakers throughout the world use GMI’s sailcloth. The manufacture of sailcloth has a small number of processes, and GMI integrates them carefully so that there is very little work-in-process inventory. The product is measured in yards of cloth, which is prepared in rolls 42 inches wide. Because it has little work-in-process inventory, GMI also uses backflush accounting to simplify the accounting for its operations. GMI has the following information for the most recent accounting period. The beginning inventory of polyester fiber was $142,000 and the ending inventory was $147,000.

Polyester fiber purchased	$690,000
Conversion cost incurred	$1,300,000
Direct materials standard cost	$4.35 per yard of cloth
Conversion standard cost	$8.50 per yard of cloth
Units produced	155,000 yards of cloth

Required Show the entries for manufacturing costs, completion of 155,000 yards of product, and the closing entries.

Step 1 of 4

4108-6-37E AID: 60589 | 21/08/2019