Trigger Points: Purchase of direct materials and incuring of conversion costs, C

Question

Trigger Points: Purchase of direct materials and incuring of conversion costs, Completion of finished units of product, sale of finished goods

Requirements

1. Prepare summary journal entries for August (without disposing of under- or overallocated conversion costs). Assume no direct materials variances.

2. Post the entries in requirement 1 to T-accounts for Materials and In-Process Inventory Control, Finished Goods Control, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods Sold.

The Grand Meter Corporation manufactures electrical meters. For August, there were no beginning inventories of direct materials and no beginning or ending work in process. Grand Meter uses a JIT production system and backflush costing with three trigger points for making entries in the accounting system. Grand Meter's August standard cost per meter is direct material, $24; and conversion cost, $18. Grand Meter has no direct materials variances. The following data apply to August manufacturing: Direct materials purchased 540,000 Number of finished units manufactured 19,000 Conversion costs incurred 425,000 Number of finished units sold 17,000

Explanation / Answer

Solution:-

1. Prepare summary journal entries for August:-

a:- 19,000 * (24 + 18) = 798,000; 19,000 * 24 = 456,000; 19,000 * 18 = 342,000

b:- 17,000 * (24 + 18) = 714,000

2. Post the entries in requirement 1 to T-accounts for Materials and In-Process Inventory Control, Finished Goods Control, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods Sold:-

Please Rate or comment if you have any doubt regarding this solution.

Sr. No. Paticulars Account titles and description Debit Credit (a) Purchase of direct materials Materials and In-Process Inventory Control 540,000 Accounts payable control 540,000 (b) Record conversion cost incurred Conversion cost control 425,000 Various account (such as wages payable accounts) 425,000 (c) Record cost of good finished units completed Finished goods controla 798,000 Material and in process Inventory controla 456,000 Conversion cost allocateda 342,000 (d) Redord cost of finished goods sold Cost of goods soldb 714,000 Finished goods control 714,000

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