JUST IN TIME AND BACKFLUSH COSTING

Part I: Theory of Accounts

1. It is a production system in which each component in a production line is produced immediately as

needed by the next step in the production process.
a. Activity Based Costing system
b. Just-in-time manufacturing system
c. Just-in-case inventory system
d. Min-max inventory system

2. It is a product costing system that is usually used for just-in-time production systems since it eliminates
the detailed tracking of cost throughout the production system and only prepares journal entries at the
specified trigger points.
a. Backflush costing
b. Standard costing
c. Normal costing
d. Traditional costing

3. Which costing method is the most appropriate when using backflush costing in a just-in-time inventory
system?
a. Normal costing
b. Actual costing
c. Standard costing
d. Budgeted costing

4. Which of the following is not a benefit of utilizing a just-in-time inventory system?

a. Lowering the cost of inventory
b. Enhanced product quality and delivery time
c. Less margin for errors in the production process
d. Accounting procedures are simplified through backflush costing

1. Which of the following is/are

true regarding Just-In-Time
Systems?
A. elimination of any production
process that does not add value
to the product
B. performance efficiency
C. reduction in total cost of
production while increasing
quality
D. all of the above
2. Statement 1: In a just-in-
time (JIT) environment, the
optimal situation is to have only
one vendor for
any given item.
Statement 2: When a
company adopts the just-in-
time (JIT) system, the benefits
from this system
will immediately show in the
company's performance.
A. Statement 1 is TRUE and
statement 2 is FALSE
B. Statement 1 is FALSE and
statement 2 is TRUE
C. Both statements are TRUE
D. Both statements are FALSE
1. Which of the following is/are
true regarding Just-In-Time
Systems?
A. elimination of any production
process that does not add value
to the product
B. performance efficiency
C. reduction in total cost of
production while increasing
quality
D. all of the above
2. Statement 1: In a just-in-
time (JIT) environment, the
optimal situation is to have only
one vendor for
any given item.
Statement 2: When a
company adopts the just-in-
time (JIT) system, the benefits
from this system
will immediately show in the
company's performance.
A. Statement 1 is TRUE and
statement 2 is FALSE
B. Statement 1 is FALSE and
statement 2 is TRUE
C. Both statements are TRUE
D. Both statements are FALSE
5. Which of the following is/are true regarding Just-In-Time Systems?
a. climination of any production process that docs not add valuc to the product
b. performance efficiency
c. reduction in total cost of production while increasing quality
d. all of the above

6. Statement I: In a just-in-time (TI) environment, the optimal situation is to have only one vendor tor any
given item.
Statement II: When a company adopts the just-in-lime (JIl) system, the benelits from this system will
immediately show in the company's performance.
 a. Statement 1 is TRUE and statement 2 is FALSE
b. Statement 1 is FALSE and statement 2 is TRUE
c. Both statements are TRUE
d. Both statements are FALSE

7. It is a cost accounting method that speeds up, simplifies, and minimizes accounting effort in ar
environment that minimizes inventory balances, requires few allocations, and ideally uses standard
costing with minimal variances
a. Normal Costing
b. Standard Costing
c. Backflush Costing
d. Activity Based Costing

8. Under Backflush Costing, when the company purchases materials from the supplier, the journal entry
to record the transaction involves a
a. debit to Raw Materials Inventory account
b. debit to Raw and In-Process account
c. credit to Raw and In-Process account
d. credit to Raw Materials Inventory account

9. Backflush costing uses trigger points in recording the transactions, which of the following is not
considered as a trigger point?
a. Purchase
b. Completion
c. Sale
d. All of them are trigger points

10. A streamlined accounting system:

a. Standard costing
b. Job Order costing
c. Process costing
d. Backflush costing

11. It is an inventory strategy a company employs to increase efficiency and decrease waste by receiving
and producing goods as they are needed in the production process, thereby reducing inventory costs.
a. ABC inventory system
b. Min-max inventory system
c. Pareto/80-20 inventory rule
d. Just In Time Inventory System

12. Which of the following is true?

a. Just in time systems seek to reduce manufacturing costs
b. Just in time systems seek to shorten the production time
c. Just in time systems seek to improve production quality
d. All of the above

13. Which of the following is to be expected when a traditional manufacturing firm shifts to a just in time
system?
a. Idle time will increase
b. Carrying costs will increase
c. Number of suppliers will increase
d. Quality of products will increase

14. Which costing method is the most appropriate when using backflush costing in a just-in-time inventory
system?
 a. Normal costing
b. Actual costing
c. Standard costing
d. Budgeted costing

15. Which of the following is not a benefit of utilizing a just-in-time inventory system?
a. Lowering the cost of inventory
b. Enhanced product quality and delivery time
c. Less margin for errors in the production process
d. Accounting procedures are simplified through backflush costing.

16. In a JIT system, the quality of each product begins with a.

a. company's vendors.
b. employees.
c. inspection of finished goods inventory.
d. a good product warranty.

17. Reducing setup time is a major aspect of

a. all push inventory systems.
b. the determination of safety stock quantities.
c. a JIT system.
d. an EOQ system.

18. Reducing inventory to the lowest possible levels is a major focus of

a. JIT.
b. push inventory systems.
c. EOQ.
d. ABC.

19. JIT is a philosophy concerned with

a. when to do something.
b. how to do something.
c. where to do something.
d. how much of something should be done.

20. When JIT is implemented, which of the following changes in the accounting system would not be
expected?
a. fewer cost allocations
b. elimination of standard costs
c. combining labor and overhead into one product cost category
d. combing raw material and materials in work-in-process into one product cost category

21. Striving for flexibility in the number of products that can be produced in a short period of time is
characteristic of
a. EOQ systems.
b. push systems in general.
c. JIT.
d. pull systems in general.

22. Just-in-time (JIT) inventory systems

a. result in a greater number of suppliers for each production process.
b. focus on a "push" type of production system.
c. can only be used with automated production processes.
d. result in inventories being either greatly reduced or eliminated.

23. The JIT philosophy does not focus on

 a. standardizing parts used in products.
b. eliminating waste in the production process.
c. finding the absolute lowest price for purchased parts.
d. improving quality of output.

24. In a JIT manufacturing environment, product costing information is least important for use in
a. work in process inventory valuation.
b. pricing decisions.
c. product profitability analysis.
d. make-or-buy decisions.

25. With JIT manufacturing, which of the following costs would be considered an indirect product cost?
a. cost of specific-purpose equipment
b. cost of equipment maintenance
c. property taxes on the plant
d. salary of a manufacturing cell worker

26. With JIT manufacturing, which of the following costs would be considered a direct product cost?
a. insurance on the plant
b. repair parts for machinery
c. janitors' salaries
d. salary of the plant supervisor

27. Which of the following statements is not true?

a. JIT manufacturing strives for zero inventories.
b. JIT manufacturing strives for zero defects.
c. JIT manufacturing uses manufacturing cells.
d. JIT manufacturing utilizes long lead time and few deliveries.

28. The JIT environment has caused a reassessment of product costing techniques. Which of the
following statements is true with respect to this reassessment?
a. Traditional cost allocations based on direct labor are being questioned and criticized.
b. The federal government, through the SEC, is responsible for the reassessment.
c. The reassessment is caused by the replacement of machine hours with labor hours.
d. None of the above is true.

29. When a firm adopts the just-in-time method of management,

a. employees are retrained on different equipment, but the plant layout generally remains
unchanged.
b. new machinery and equipment must be purchased from franchised JIT dealers.
c. machinery and equipment are moved into small autonomous production lines called islands or
cells.
d. new, more efficient machinery and equipment are purchased and installed in the original plant
layout.

30. Which of the following describes the effect on direct labor when management adopts the JIT
philosophy?
a. Each direct labor person performs a single task, thereby allowing that person to reach his or her
theoretical potential.
b. Because each person runs a single machine in a JIT environment, there are more employees
classified as direct labor.
c. The environment becomes more labor-intensive.
d. Machine operators are expected to run several different types of machines, help set up for
production runs, and identify and repair machinery needing maintenance.

31. JIT concepts

 a. can be effectively implemented in organizations that are only partially automated.
b. are only appropriate for use with CIM systems.
c. involve shifting from a capital-intensive to a labor-intensive process.
d. require full computerization of the JIT manufacturing process.

32. According to JIT philosophy,

a. inventories of finished goods always should be available to meet customer demand.
b. push-through manufacturing flows are the most efficient.
c. maintaining inventories wastes resources and frequently covers up poor work or other problems.
d. long production runs and large production lot sizes take advantage of economies of scale.

33. Accounting for product costs in a JIT environment

a. uses a job order costing system.
b. classifies processing costs as raw (or direct) material, direct labor, and overhead.
c. is more complex than in other types of manufacturing environments.
d. follows process costing procedures whereby costs are accumulated by the process (cell) and
attached to units processed for the period.

34. An implication of the demand-pull nature of the JIT production process is that
a. finished goods inventories must be available to meet customer demand, although raw material is
delivered on an as-needed basis.
b. more storage space for inventories is necessary.
c. finished products are packaged and shipped to customers immediately, thus requiring minimal
finished goods inventories.
d. problem areas become less visible as inventories are reduced.

35. In accounting for JIT operations, the Raw Material Inventory account
a. is closely monitored to ensure that materials are always on hand in time.
b. can be expected to have a larger balance than with traditional manufacturing methods.
c. is combined with the Work In Process Inventory account.
d. is combined with the Finished Goods Inventory account.

36. Backflush costing is concerned with which of the following?

Standard Costs Minimal variances from standards

A Yes No
B No No
C Yes Yes
D No Yes

37. The JIT philosophy indicates that inventory, as well as which of the following, should be eliminated?

Suppliers Storage Employees Business-Value-

Added Activities
A Yes Yes Yes Yes
B Yes Yes No No
C No No Yes No
D No Yes No Yes

38. Accounting for Just-In-Time operations requires fewer transactions because

a. large batches of inventory are combined in a smaller number of transactions
b. costs are accumulated in departments and then transferred to the next department
c. combined material and conversion costs are transferred to finished goods.
d. costs are transferred from department to department thus allowing for better controls in costs

39. Just-In-Time accounting has fewer transactions because

 a. all manufacturing costs are combined in one account called Raw and In Process Inventory
b. employees in production cells are required to perform various tasks, some are considered direct
costs and some are indirect costs. Therefore the distinction is eliminated.
c. Less movement of inventory between department to department.
d. All of the above.

40. The budgeted cell conversion cost rate includes which of the following?
a. factory overhead only
b. direct labor and direct materials only
c. direct labor, direct materials, and factory overhead
d. direct labor and factory overhead only

Part II: Problem Solving

1. LL2 Company uses a highly efficient just-in-time manufacturing system. The company uses backflush
costing for recording its production. The following transactions occurred for the year ended December 31,
2020:

a. Purchased P200 000 worth raw materials on account

b. Incurred direct labor costs of P100,000.
c. Actually incurred factory overhead costs amounting to P120,000
d. Applied a total of P220,000 to the production as conversion cost
e. No materials were left in the production process
f. All goods were completed and sold

I. Assuming the company has three trigger points in its backflush costing system, the entry to record the
sale of goods would include a debit to cost of goods sold account for P420,000 and a credit to:
a. Trade pavable account for 200,000
b. Finished goods account for 420,000
c. Accrued factor bavroll account for 80,000
d. Raw materials and in process account for 200,000

II. Assume that the company has two trigger points in its backflush costing system, namely in the
purchase of materials stage and in the sale of goods stage. the entry to record the sale of goods
would include:

a. A credit to trade pavable account for 200.000

b. A credit to Finished goods account for 420.000
c. A debit to Accrued factory payroll account for 80,000
d. A credit to Raw materials and in process account for 200 000

2. GHY Company has a cycle time of 2 davs. It uses a raw materials and in process account and charges
all conversion costs to cost of goods sold. At the end of each month. all inventories are counted
conversion costs components are estimated and inventor account balances are adiusted. Raw material
cost is backflushed from the raw materials and in process account to the finished goods account. The
following information is provided for the month of December:

Beginning Balance of RIP account, including P5,000 conversion cost 15,000

Beginning Balance of finished goods account, including P8,000 conversion cost 20,000
Raw materials received on credit 500,000
Direct labor cost 350,000
Factory overhead applied 450,000
Ending RIP inventory per physical count, including P9,000 conversion cost 30,000
Ending finished goods inventory per physical count, including P4,000 conversion cost 11,000
 I. How much is the cost of goods sold for the month of December?
a. 494,000
b. 800,000
c. 1.285,000
d. 1,294,000

II. How much is the conversion cost included cost of goods sold in June?
a. 494,000
b. 800,000
c. 1,285,000
d. 1,294,000

III. How much direct materials were backflushed from RIP to finished goods?
a. 489,000
b. 494,000
c. 500,000
d. 1,285,000

IV. How much direct materials were backtlushed from finished goods to cost of goods sold.
a. 489,000
b. 494,000
c. 500,000
d. 1,285,000

3. Hublot Co. adopted the Just-In-Time (JIT) production system and used Backflush Costing to account
the cost of the produced goods. The following data were given:

Purchase of raw materials 2,000,000

Materials requisitioned into production 1,980,000
Direct labor 600,000
Factory overhead incurred 800,000
Applied factory overhead 900,000
Units produced 50,000
Units sold 49,000

There were no beginning inventories for raw materials, work-in-process, and finished goods.

I. What is the ending balance of the Raw and In-Process / Materials In-Process account?
a. 10,000
b. 20.000
c. 30.000
d. 0

II. What is the amount of the cost of goods manufactured?

a. 3,400,000
b. 3,380,000
c. 3,480,000
d. 3,500.000

III. What is the amount of the cost of goods sold?

a. 3,332,000
b. 3,312,400
c. 3.430.000
d. 3,410,400
4. Petronas Co. adopted the Just-In-Time (JIT) production system and used Backflush Costing. They also
used a Raw and In-Process account for the materials. The following data were given:

Beginning balance of RIP account P50,000

Materials purchased on account 1,500,000
Ending balance of RIP account 100,000

I. What is the amount of materials that is backflushed from Raw and In-Process to Finished Goods?
a. 1.450.000
b. 1,550,000
c. 1,500,000
d. 1.400.000

II. Assume the answer in No. 1 and the applied conversion cost amounting to P1,350,000 were for the
200,000 units completed. What is the cost of goods sold if only 180,000 units were sold?
a. 2,610,000
b. 2,565,000
c. 2,520.000
d. 2,475,000

5. The Pampanga Manufacturing Company uses a raw and in process (RIP) inventory account and
expenses all conversion costs to the cost of goods sold account. At the end of each month, all inventories
are counted, their conversion cost components are estimated. Raw materials cost is backflushed from
RIP to Finished Goods. The following information is for the month of April:

Beginning balance of RIP account, including P1,400 of conversion cost 31,000

Raw materials received on credit 367,000
Ending RIP inventory per physical count, including P1,800 conversion cost estimate 33,000

Compute the amount to be backflushed from RIP to finished goods.

a. P365,000
b. P368,600
c. P367,000
d. P365,400

Beginning balance of RIP account (31,000 – 1,400) 29,600

Add: Raw materials received on credit 367,000
Less: Ending balance of RIP inventory per physical count (33,000 – 1,800) (31,200)
Amount to be backflushed 365,400

6. The Bulacan Manufacturing Company produces only for customer order and most work is shipped
within thirty-six hours of the receipt of an order. Bulacan uses a raw and in process (RIP) inventory
account and expenses of conversion costs to the cost of goods sold account. Work is shipped
immediately upon completion, so there is no finished goods account. At the end of each month, inventory
is counted, its conversion cost competent is estimated, and the RIP account balance is adjusted
accordingly. Raw material cost is backflushed from RIP to Cost of Goods Sold. The following information
is for the month of May.

Beginning balance of RIP account, including P1,300 of conversion cost 12,300

Raw materials received on credit 246,000
Ending RIP inventory per physical count, including P2,100 conversion cost estimate 12,100

I. Compute the amount to be backflushed from RIP to Cost of Goods Sold

a. 246,000
b. 246,200
 c. 247,000
d. 245.000

Beginning balance of RIP account (12,000 – 1,300) 11,000

Add: Raw materials received on credit 246,000
Less: Ending balance of RIP inventory per physical count (12,100 – 2,100) (10,000)
Amount to be backflushed 247,000

Cost of goods sold 247,000

Raw and In Process 247,000

II. Compute the amount of Cost of Goods Sold after all transactions and adjustments were made
a. 246,000
b. 246,200
c. 247,000
d. 245,000

Cost of goods sold 247,000

Less: Adjustments in conversion cost (2,100 – 1,300) 800,000
Adjusted Cost of Goods Sold 246,200

7. Changi Ong, general manager of Casio Corporation's Midwest Division, has provided the following
information for transactions that occurred during March. This division uses a JIT costing system.
(a) Raw materials were purchased at the cost of P97,000
(b) All materials purchased were requisitioned for production.
(c) Direct labor costs of P77,000 were incurred.
(d) Actual factory overhead costs amounted to P255,000.
(e) Applied conversion costs totalled P300,000. This included P77,000 of direct labor.
(f) All units were completed.

I. Compute the March 31 balance in the Conversion Cost:

a. 2,000 debit
b. 2,000 credit
c. 25,000 credit
d. 22,000 debit

Actual factory overhead 225,000

Direct labor costs incurred 77,000
Total actual conversion cost 302,000
Less: Applied conversion cost to production 300,000
March 31, Conversion cost balance - Debit P2,000 under applied

II. Compute the March 31 balance in the Finished goods account:

a. 397,000 credit
b. 397,000 debit
c. 320,000 debit
d. 377,000 debit

Amount to be backflushed from RIP to COGS P97,000

Applied conversion costs to production 300,000
March 31, Cost of Goods Sold balance - Debit P397,000

8. Katherine, owner of KCO Supply Company in Cebu, which manufactures chopsticks for restaurants,
has recently decided to implement a JIT costing system. Transactions for August are as follows:
(a) Raw materials were purchased at the cost of P950,000
(b) All materials purchased were requisitioned for production.
(c) Direct labor costs of P2,500,000 were incurred.
(d) Actual factory overhead costs amounted to P6,000,000.
(e) Applied conversion costs totalled P8,100,000. This included P2,500,000 of direct labor.
(f) All units were completed.

I. Compute the amount to be backflushed from RIP to Finished Goods:

a. 2,100,000
b. 2,550,000
c. 950,000
d. 3,100,000

Raw materials purchased were requisitioned for production 950,000

(No RIP beg and ending balance)

II. Compute the amount of Finished goods after all transactions have been completed
a. P8,500,000
b. P9,050,000
c. P10,600,000
d. P9,650,000

Amount to be backflused from RIP to Finished goods 950,000

Applied conversion costs to production 8,100,000
Amount of Finished Goods 9,050,000

9. G. Bello, general manager of a highly automated coffee production plant in Laguna, Ilocos Sur, has
provided the following information for transactions that occurred during October. The production plant
uses a JIT costing system.

(a) Raw materials costing P300,000 were purchased

(b) All materials costing P300,000 were requisitioned for production.
(c) Direct labor costs of P200,000 were incurred.
(d) Actual factory overhead costs amounted to P995,000.
(e) Applied conversion costs totalled P1,300,000. This includes the direct the labor cost.
(f) All units are completed and immediately sold.

I. Determined the October 31 balance in the Cost of Goods Sold account. No adiustment has been made
for overapplied or underapplied conversion cost.
a. 1,300,000
b. 1,495,000
c. 1,600,000
d. 1,195,000

300,000
1,300,000
1,600,000

II. What was the overapplied or underapplied conversion costs for the month?
a. 305,000 overapplied
b. 195,000 underapplied
c. 105,000 overapplied
d. 105,000 underapplied

Actual factory overhead 995,000

Direct labor cost incurred 200,000
 Total actual conversion costs 1,195,000
Conversion costs allocated to 1,300,000
production
Over-all allocated conversion costs 105,000

III. What is the Cost of Goods Sold after all transactions-adjustments have been completed?
a. 1,304,000
b. 1,495,000
c. 1,600,000
d. 1,195,000

10. Ube Jewelry Factory manufacturer a variety of costume jewelry. The owner Rita Conrad had recently
decided to implement a JIT Costing System. Transactions during September were as follows:

(a) Raw materials totalling P45,000 were purchased.

(b) All materials purchased were requisitioned for production.
(c) Direct labor costs of P11,000 were incurred.
(d) Indirect labor costs amounted to P120,000.
(e) Utilities costs totalled P15,000.
(f) Other actual factory overhead costs incurred amounted to P85.000.
(g) Applied conversion costs totalled P221,000. This includes the direct labor
(h) All units were completed.

I. Determine the September 30 balance in the cost of goods sold amount. No adjustment has been made
for overapplied or underapplied conversion cost:
a. 266,000
b. 276,000
c. 221,000
d. 220,000

II. What was the overapplied or underapplied conversion costs for the month?
a. 16,000 overapplied
b. 16,000 underapplied
c. 10,000 underapplied
d. (10,000) overapplied

11. Kara Manufacturing used backflush costing to account for an electronic meter it makes. During August
2008, the firm produced 16,000 meters, of which it sold P15,800. The standard cost for each meter Is:

Direct materials 20
Conversion costs 44
64

Assume that the firm had no inventory on August 1. The following events took place in August:
- Purchased P320,000 of direct materials.
- Incurred P708,000 conversion costs
- Applied P704,000 of conversion costs to Raw and In Process Inventory (RIP)
- Finished 16,000 meters.
- Sold 15,800 meters for P100 each.

I. Compute the amount to be backflushed from RIP to Finished Goods:

a. 320,000
b. 704.000
c. 1,024,000
e. 1.028,000
II. Determine the August 31 (ending balance) of Finished Goods account:
a. 0
b. 12,850
c. 12.962
d. 12.800

12. Timberlake Manufacturing Corp uses a JIT production system. The following transactions transpired
during the year ended December 31, 2023:
a. Purchased raw materials account on account, P1,500,000
b. Only P10,000 materials were left unused by the end of the year
c. Actual direct labor costs of P700,000 were incurred.
d. Actual factory overhead costs totaled P500,000.
f. P1,200,000 conversion costs were applied to production.
g. All units were completed and sold with the exception of P20,000 left in finished goods inventory.

I. Assuming first that the company uses a traditional costing method, the entry to record the purchase will
include:
a. Debit to raw materials, P1,500,000
b. Debit to raw materials and in process, P1,500,000
c. Debit to finished goods, P1,500,000
d. No entry

II. Assuming that the company uses a backflush costing system with three trigger points, the entry to
record the purchase will include:
a. Debit to raw materials, P1,500,000
b. Debit to raw materials and in process, P1,500,000
c. Debit to finished goods, P1,500,000
d. No entry

III. Assuming that the company uses a backflush costing system with two trigger points, with purchase as
one of the trigger points, the entry to record the sale will include:
a. No entry
b. Debit to finished goods, P20,000
c. Debit to finished goods, P2,690,000
d. Debit to cost of goods sold, P2,690,000

IV. Assuming that the company uses a backflush costing system with two trigger points, with production
completion as one of the trigger points, the entry to record the sale will include:
a. No entry
b. Debit to finished goods, P20,000
c. Debit to finished goods, P2,690,000
d. Debit to cost of goods sold, P2,670,000

V. Assuming that the company uses a backflush costing system with only one trigger point, the entry to
record the sale will include:
a. Debit to raw materials and in process, P10,000
b. Debit to finished goods, P20,000
c. Debit to cost of goods sold, P2,670,000
d. All of the above

13. Bieber Productions Incorporated uses a backflush costing system. At the end of each month, all
inventories are counted, conversion costs components are estimated, and inventory account balances are
adiusted. Raw material cost is backflushed from the raw materials and in process account to the finished
goods account. The following information is provided for the month of December:

Raw materials purchased on account 800,000

 Direct labor cost 400,000
Factory overhead applied 600,000
Beginning Balance of MIP account, including P7.000 conversion cost 25,000
Beginning Balance of finished goods account, including P4,000 conversion cost 10,000
Ending MIP inventory per physical count, including P3,000 conversion cost 5,000
Ending finished goods inventory per physical count, including P1,000 conversion cost 4,000

I. How much direct materials were backflushed from RIP to finished goods?
a. 816,000
b. 819,000
c. 1,007,000
d. 1,826,000

II. How much direct materials were backflushed from finished goods to cost of goods sold?
a. 816,000
b. 819,000
c. 1,007,000
d. 1,826,000

III. How much is the cost of goods manufactured?

a. 816.000
b. 1,004,000
c. 1,820,000
d. 1,826,000

14. Recon Co. operates in a just-in-time (JIT) manufacturing environment. For June production, Recon
purchased 2,000 units of raw materials at P6.00 per unit. The journal entry required to record this
transaction is:

a. Raw Materials Inventory 12,000

Accounts payable 12,000
b. Cost of Goods Manufactured 12,000
Accounts Payable 12,000
c. Finished Goods 12,000
Accounts Payable 12,000
d. Raw and In Process Inventory 12,000
Accounts Payable 12,000

15. Mitchell Manufacturing operates in a just-in-time (JIT) manufacturing environment. Mitchell's actual
conversion costs for the month of April follow:

Direct and indirect labor 120,000

Machine depreciation 85,000
Maintenance and supplies 60,000
Total conversion costs 265,000

The journal entry to record April's conversion costs will include:

a. a debit to Work in Process Inventory
b. a debit to Raw Materials Inventory
c. a credit to Raw and In Process Inventory
d. a debit to Raw and In Process Inventory

16. Foley Electronics Corporation manufactures and assembles electronic motor drives for video
cameras. The company assembles the motor drives for several accounts. The process consists of a just-
in-time cell for each customer. The following information relates only to one customer's just-in-time cell.
For the year planned labor and overhead was P76,800,000; materials costs, P25 per unit. Planned
production included 9,600 hours to produce 76,800 motor drives. Actual production for the month of
August was 5,200 units, and motor drives shipped amounted to 5,040 units. From the foregoing
information, determine the budgeted cell conversion cost per hour.
a. P8,800
b. P800
c. P7,200
d. P8,000

17. Foley Electronics Corporation manufactures and assembles electronic motor drives for video
cameras. The company assembles the motor drives for several accounts. The process consists of a just-
in-time cell for each customer. The following information relates only to one customer's just-in-time cell for
the coming year. Projected labor and overhead, P4,800,000; materials costs, P25 per unit. Planned
production included 2,400 hours to produce 19,200 motor drives. Actual production for August was 1,300
units, and motor drives shipped amounted to 1,260 units.
From the foregoing information, determine the budgeted cell conversion cost per unit.
a. P250.00
b. P267.00
c. P308.00
d. P317.00

18. From the foregoing information, determine the manufacturing cost per unit.
a. P292.00
b. P275.00
c. P333.00
d. P342.00

19. From the foregoing information, determine the amount of the conversion costs charged to Raw and In
Process Inventory during August.
a. 440,000
b. 400,000
c. 360,000
d. 325,000

20. From the foregoing information, determine the production costs transferred to Finished Goods during
August.
a. P346,500
b. P412,500
c. P357,500
d. P400,000

21. From the foregoing information, determine the production costs transferred to Cost of Goods Sold
during August.
a. P357,500
b. P412,500
c. P400,000
d. P346,500

22. Ambiong Company operates a demand-pulled manufacturing system wherein delivery is made within
24 hours from the receipt of a customer order. Ambiong maintains a Raw and In Process account and
expenses all conversion costs to cost of goods sold. No finished goods account is maintained since all
production runs are immediately delivered. At the end of each month, the conversion costs is estimated in
ending inventories and the Raw and In Process account is adjusted accordingly. Raw material cost is
backflushed to cost of goods sold. The following information is for the month of May:

Raw and In process, beginning (with P1,300 conversion costs) 12,300

 Raw materials received from suppliers 246,000
Conversion costs incurred 60,000
Raw and In process, end, per count (with estimated P2,100 conversion costs) 12,100

I. Compute the amount to be backflushed from Raw and In Process to Cost of Goods Sold.
a. P246,000
b. P246,200
c. P247,000
d. P245,000

II. Compute the amount of cost of goods sold after all adjustments
a. P306,000
b. P306,200
c. P307,000
d. P246,200

23. Toyota Manufacturing Company (TMC) has a demand pulled manufacturing process. Goods
completed are immediately delivered to customers thereby it does not maintain a finished goods account.
TMC uses a raw and in process (RIP) account to record raw materials and inprocess items. At the end of
the year, the production engineer of Toyota Manufacturing Company estimates the RIP account at
P120,000. This balance is P20,000 higher than the last year’s balance. Also P12,000 of this increase is
attributable to raw materials in the RIP account. The journal entry to adjust the records will likely include a
a. debit to RIP.
b. debit to COGS
c. credit to materials
d. credit to conversion costs

Part III: Straight Problems

1. Giardini del Sole Wooden Furnitures uses a Raw and In Process (RIP) inventory account. Raw material
cost is backflushed from RIP to Finished Goods account. The following data pertains to the month of
March, 2019:

Beginning balance of RIP account 30,000

Raw materials purchased 350,000
Conversion costs incurred 5,700
Conversion costs allocated 4,300
Ending balance of RIP account 39,200

Required: Compute for the amount of direct materials and conversion costs to be backflushed to Finished
Goods.

2. FLM Company, manufacturer of ballpens, has recently decided to implement a JIT costing system
Transactions for June are as follows:
a. Raw materials were purchased at cost of P900,000
b. All raw materials purchased were requisitioned for production.
c. Direct labor costs of P2,000,000 were incurred.
d. Actual factory overhead costs amounted to P5,000,000.
e. Applied conversion costs total P8,000,000, which includes the P2,000,000 direct labor.
f. All units were completed.

Required: Determine the amount to be backflushed from Raw and In Process (RIP) to Finished Goods
(FG) and the amount of Finished Goods after all transactions have been completed
3. HV Manufacturing uses backflush costing to account for an electronic meter it makes. During June
2019, the firm produced 15,000 meters of which it sold 15,800. The standard cost for each meter is:

Direct materials P30

Conversion costs 55
P85

Assume that the firm had no inventory on June 1. The following events took place in June:
a. Purchased P350 000 of direct materials
b. Incurred P705,000 of conversion costs
c. Applied P990,000 to Raw and In Process Inventory (RIP)
d. Finished 18,000 meters.
e. Sold 17,800 meters for P98 each.

Required: Determine the amount to be backflushed from RIP to Finished Goods and the June 30 (ending
balance) of Finished Goods account.

4. Rigel Company uses a backflush cosing system with three trigger points. There are no beginning
inventories. The following data pertain to July, 2019:

Raw materials purchased P850,000

Raw materials used 820,000
Conversion costs incurred 392,000
Conversion costs allocated to finished goods 370,000
Costs transferred to finished goods 950,000
Costs of goods sold 890,000

Required: Compute for the balance of Raw and In Process (RIP) account for July, 2019.
5. Eagleman Company produces portable DVD. For the month of November, there were no beginning
inventory of raw materials and no beginning and ending balances for Work-in-Process. It uses JIT
manufacturing system and backflush costing with two trigger points in its accounting system: (1) purchase
of raw materials and (2) sale of finished goods.

The standard cost per unit for direct materials is P30 and conversion cost P10. The following data
pertains to November production:

Raw materials purchased P10,500,000

Conversion costs incurred 7,340,000
Number of finished units manufactured 250,000
Number of finished units sold 234,000

Required: Compute the balances of RIP and CGS accounts at the end of November.

6. The Backflushers Manufacturing Corp. uses a Raw and In Process inventory account and expenses all
conversion costs to the cost of goods sold account. At the end of the month, all inventories are counted,
their conversion cost components are estimated, and inventory account balances are adjusted
accordingly. Raw material cost is backflushed from RIP to finished goods. The following information is for
the month of May:

Raw and In Process inventory account, May 1, including P500 of conversion cost 5,000
Raw materials received during May (50% down, balance four installments) 100,000
Raw and In Process inventory account, May 31, including P650 of estimated 5,250
conversion cost

What is the amount to be backflushed from RIP to finished goods?

7. The Backflushers Manufacturing Corp. uses a Raw and In Process inventory account and expenses all
conversion costs to the cost of goods sold account. At the end of each month, all inventories are counted,
their conversion cost components are estimated, and inventory account balances are adjusted
accordingly. Raw material cost is backflushed from RIP to finished goods. The following information is for
the month of May:

Raw and In Process inventory account, May 1, including P500 of conversion cost 5,000
Finished goods inventory, May 1, including P3,250 of conversion cost 11,250
Raw materials received during May (50% down, balance in four installments) 100,000
Raw and In Process inventory account, May 31, including P650 of estimated 5,250
conversion cost
Finished goods inventory account, May 31, including P2,500 conversion cost estimate 7,500

What is the amount to be backflushed from RIP to cost of goods sold?

What is the balance of cost of goods sold after adjustment?

8. The Nite Lite Company has budgeted its conversion cost for the small lamp production as P58,000 for
1,200 production hours. Each unit produced by the cell requires 20 minutes of process time. During the
month, 3,500 units are manufactured in the cell. the estimated material costs per unit is P17.00.

Provide the following journal entries.

a. Materials are purchased to produce 3,600 units.
b. Conversion costs are applied to 3,500 units of production.
c. 3,400 units are placed into finished goods

9. Weloc Company produces parts for the auto industry. Part X2 is machined in Department #1, which
has the following budgeted conversion costs:

Labor 220,000
Depreciation 30,000
Maintenance 10,000
Supplies 25,600
Total 285,600

All costs are driven by machine hours. Total possible hours for the year are 2,400. It takes .03 hours to
machine one unit of Part X2.

Required:
(a) Compute Department #1's budgeted cell conversion cost rate for the current year.
(b) Compute Part X2's budgeted cell conversion cost per unit

10. Fashion Pattern Company makes dressmakers' patterns using a machine that stamps the pattern
outline onto tissue paper. The stamping center produced 30,000 patterns in August, with a machine time
per pattern of 15 seconds. Annual budgeted cell conversion costs were as follows:

Maintenance and Supplies 480,000

Depreciation 600,000
Supporting labor 816,000
Total 2,896,000

Fashion planned 2,000 total machine hours for the year.

Required: Calculate Fashion's budgeted cell conversion cost rate for the year.
11. The Jackson Co. operates in a just-in-time (JIT) manufacturing environment. During 2008, its first year
of operations, Jackson budgeted for 40,000 hours in the production of 100,000 units in its cell X-22.
Material costs were P7 per unit. Cell X-22 conversion costs were budgeted for the year as follows:

Direct and indirect labor 900,000

Machine depreciation 125,000
Maintenance and supplies 375,000
Utilities 225,000
Total 1,625,000

During January, 8,200 units were manufactured, and 8,000 were sold shipped to customers for and P35
each. For the month of January, journalize:
1. the material purchases
2. application of conversion costs
3. the transfer from work in process to finished goods; and
4. to record the sales and associated cost of goods sold

12.
Purchase of direct materials 200,000
Direct materials used 180,000
Conversion costs incurred 250,000
Conversion costs applied 300,000

The inventory of direct materials increased by P20,000 (P200,000 - P180,000) during the month and
conversion costs were applied by P50,000 (P300,000 - P250,000). The company charges overapplied or
underapplied conversion cost to cost of goods sold at the end of the year.

The journal entries to record

1) The purchase of direct materials
2) The conversion costs incurred
3) The completion of finished product during the month follow.

Raw and In Process Inventory 200,000

Accounts payable (Cash) 200,000

Conversion costs 250,000

Wages payable (other accounts) 250,00

Finished goods 480,000

Raw and In Process Inventory 180,000
Conversion costs 300,000