For August, there were no beginning inventories of direct materials and no beginning or ending work in process. Acton uses a 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
Conversion costs incurred……….. $440,000
Number of finished units manufactured….. 21,000
Number of finished units sold …….. 20,000
1. Prepare summary journal entries for August (without disposing of under- or over allocated conversion costs). Assume no direct materials 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.