Product Costing in a JIT/Lean Environment Doll Computer manufactures laptop comp
ID: 2479021 • Letter: P
Question
Product Costing in a JIT/Lean Environment Doll Computer manufactures laptop computers under its own brand, but acquires all the components from outside vendors. No computers are assembled until the order is received online from customers, so there is no finished goods inventory. When an order is received, the bill of materials required to fill the order is prepared automatically and sent electronically to the various vendors. All components are received from vendors within three days and the completed order is shipped to the customer immediately when completed, usually on the same day the components are received from vendors. The number of units in process at the end of any day is negligible. The following data are provided for the most recent month of operations: Actual components costs incurred $916,000 Actual conversion costs incurred 203,000 Units in process, beginning of month -0- Units started in process during the month 6,000 Units in process, end of month -0- (a) Assuming Doll uses traditional cost accounting procedures: 1. How much cost was charged to Work-in-Process during the month? 2. How much cost was charged to cost of goods sold during the month? (b) Assuming Doll is a lean production company and uses backflush costing method: 1. How much cost was charged to Work-in-Process during the month? 2. How much cost was charged to cost of goods sold during the month?
Explanation / Answer
(a) Assuming Doll uses traditional cost accounting procedures:
1. How much cost was charged to Work-in-Process during the month?
Cost charged will be total of material and the conversion cost which is $ 1,119,000.
2. How much cost was charged to cost of goods sold during the month?
Total goods sold is 6,000 units so cost charged to cost of goods sold is $1,119,000
(b) Assuming Doll is a lean production company and uses backflush costing method:
1. How much cost was charged to Work-in-Process during the month?
No cost will be charged.
2. How much cost was charged to cost of goods sold during the month?
Total goods sold is 6,000 units so cost charged to cost of goods sold is $1,119,000
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