Problem:
The Acton Corporation manufactures electrical meters. For August, there were no beginning inventories of direct materials and no beginning or ending work in process. Acton uses JIT production system and backflush costing with three trigger points for making entries in the accounting system:
Purchase of direct materials - debited to Inventory: Materials and In-Process Control
Completion of good finished units of product - debited to Finished Goods Control
Sale of finished goods
Acton's August standard cost per meter is direct material, $25; and conversion cost, $20. The following data apply to August manufacturing:
Direct materials purchased - $550,000 Number of finished units manufactured - 21,000
Conversion costs incurred - $440,000 Number of finished units sold - 20,000
1. Prepare summary journal entries for August (without disposing of under-or overallocated conversion costs). Assume no direct material variances.
2. Post the entries in requirement 1 to T-accounts for Inventory: Materials and In-Process Control, Finished Goods Control, Conversion Costs Control, Conversion Costs Allocated, and Cost of Goods Sold.