Backflush Variations Illustrated and Compared with Traditional Cost Flow Accounting
A JIT company had the following transactions during June:
1. Purchased raw materials on account for $160,000.
2. Placed all materials received into production.
3. Incurred actual direct labor costs of $25,000.
4. Incurred actual overhead costs of $225,000.
Transaction
1. Purchase of
RM
2. RM issued to
production
3. DL Cost
incurred
4. OH cost
incurred
5. Application of
OH
6. Completion of
goods
Traditional Journal Entries
Materials Inventory
WIP Inventory
8. Variance
recognized
(underapplied)
225,000
CC Control
225,000
Accounts Payable
160,000
250,000
CC Control
250,000
CC Control
250,000
CC Control
250,000
Wages Payable
25,000
Wages Payable
25,000
Wages Payable
25,000
Wages Payable
25,000
Accounts Payable
225,000
Accounts Payable
225,000
Accounts Payable
225,000
Accounts Payable
225,000
210,000
210,000
395,000
FG Inventory
395,000
395,000
FG Inventory
OH Control
160,000
25,000
WIP Inventory
COGS
160,000
Backflush Journal Entries: Variation 4
25,000
OH Control
FG Inventory
Accounts Payable
RMIP Inventory
Backflush Journal Entries: Variation 3
160,000
Accounts Payable
WIP Inventory
160,000
Backflush Journal Entries: Variation 2
160,000
Wages Payable
OH Control
RMIP Inventory
160,000
RM Inventory
WIP Inventory
Backflush Journal Entries: Variation 1
160,000
Accounts Payable
COGS
7. Goods are sold
5. Applied conversion costs of $235,000.
6. Completed all work for the month.
7. Sold all completed work.
8. Computed the difference between actual and applied costs.
15,000
395,000
160,000
Accounts Payable
160,000
CC Control
235,000
CC Control
235,000
395,000
FG Inventory
COGS
15,000
FG Inventory
RMIP Inventory
COGS
395,000
395,000
CC Control
COGS
395,000
15,000
COGS
RMIP Inventory
160,000
CC Control
235,000
COGS
15,000
395,000
CC Control
15,000
FG Inventory
COGS
15,000
395,000
CC Control
COGS
395,000
15,000
Accounts Payable
160,000
CC Control
235,000
COGS
15,000
395,000
CC Control
15,000
15,000