Question: Backflush Costing Sawtooth Meter manufactures a variety of measuring instruments. One product is an altimeter used by hikers and mountain climbers. Sawtooth adopted a JIT viewpoint with an automated, computer controlled, robotic production system. The company schedules production only after an order is received, materials and parts arrive just as they are needed, the production cycle time for altimeters is less than one day, and completed units are packaged and shipped as part of the production cycle. Sawtooth's backflush-costing system has only three accounts related to production of altimeters: materials and parts inventory, conversion costs, and finished-goods inventory. At the beginning of April (as at the beginning of every month), each of the three accounts had a balance of zero. Following are the April transactions related to the production of altimeters:
The budgeted (or standard) cost for one altimeter is $21 for materials and parts and $7 for conversion costs.
1. Prepare summary journal entries for the production of altimeters in April.
2. Compute the cost of goods sold for April. Explain any assumptions you make.
3. Suppose the actual conversion costs incurred during April were $90,600 instead of $89,600, and all other facts were as given. Prepare the additional journal entry that would be required at the end of April. Explain why the entry was necessary.