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JIT Costing

This document contains information about just-in-time and backflush costing systems. It provides examples of questions about identifying costs as period or product costs, defining just-in-time inventory systems, backflush costing, and allocating service department costs. It also includes two problems involving companies using just-in-time production and backflush cost accounting, requiring calculation of costs of goods sold and amounts backflushed between inventory accounts.

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378 views2 pages

JIT Costing

This document contains information about just-in-time and backflush costing systems. It provides examples of questions about identifying costs as period or product costs, defining just-in-time inventory systems, backflush costing, and allocating service department costs. It also includes two problems involving companies using just-in-time production and backflush cost accounting, requiring calculation of costs of goods sold and amounts backflushed between inventory accounts.

Uploaded by

hellokittysaranghae
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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FAR EASTERN UNIVERSITY

Just-in-time and Backflush Costing

Part I: Theory of Accounts

1. Which of the following costs shall be considered as period cost instead of product cost?
a. Finance cost on inventory loan and foreign exchange differences arising from purchases
b. Freight-in and insurance while in transit of the raw materials
c. Non-creditable import duties and irrecoverable value added tax
d. Cost of indirect material used and indirect labor incurred

2. 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. Just In Time Inventory System
b. Min-max inventory system
c. Pareto/80-20 inventory rule
d. ABC inventory system

3. It is a product costing system generally used in just-in-time inventory environment. This costing
system delays the costing process until the production of goods is completed by eliminating the
detailed tracking of cost throughout the production system and preparing journal entries only at
trigger points.
a. Backflush costing
b. Standard costing
c. Normal costing
d. Traditional costing

4. Which of the following statements of service department costs allocation pertains to direct
method?
a. This method allocates each service department’s total costs directly to the production
departments, and ignores the fact that service departments may also provide services to other
service departments.
b. This method is also called sequential method that allocates the costs of some service
departments to other service departments, but once a service department’s costs have been
allocated, no subsequent costs are allocated back to it.
c. This method is the most accurate of the three methods for allocating service department costs,
because it recognizes reciprocal services among service departments. It is also the most
complicated method, because it requires solving a set of simultaneous linear equations.
d. None of the above.

5. Under Just-in-Time Inventory System and Backflush Costing, what costing method is ideally
employed?
a. Normal costing
b. Actual costing
c. Standard costing
d. Budgeted costing

1|Page ADVANCED FINANCIAL ACCOUNTING AND REPORTING j s a b e l l a r


Part II: Problem Solving

1. Kettle Korn Inc. is employing a sophisticated 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 P170,000 of raw materials on account.
b. All materials purchased were requisitioned for production.
c. Incurred direct labor costs of P80,000.
d. Actual factory overhead costs amounted to P122,000.
e. Applied conversion costs totaled P202,000 including direct labor cost of P80,000.
f. All telephones were completed and sold.
What is the cost of goods sold for the year ended December 31, 2020?
a. 372,000
b. 202,000
c. 250,000
d. 292,000

2. HONDA Inc. is using Just-in-Time Production System and Backflush Cost Accounting System for the
year ended December 31, 2020. The following information was provided for the year 2020:
a. Raw materials purchased for year 2020 totaled P1,000,000.
b. Direct labor for the year 2020 totaled P500,000.
c. Actual overhead for the year 2020 totaled P300,000 and the standard overhead rate is 50% of
direct labor cost.
d. The production report for year 2020 showed that the Finished Goods Inventory at December
31 was P200,000 consisting of:
Direct Materials 110,000
Direct Labor 60,000
Factory Overhead 30,000
What is the Cost of Goods Sold for the year ended December 31, 2020?
a. 1,600,000
b. 1,550,000
c. 1,800,000
d. 1,750,000

3. Panay Company has a cycle of 3 days, uses a Raw and In Process Account (RIP) 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 inventory account balances are adjusted. Raw material
cost is backflushed from Raw and in Process (RIP) Account to finished goods. The following
information is provided for the month of June:

Beginning Balance of RIP account, including P1,000 conversion cost 5,000


Beginning Balance of finished goods account including P6,000 conversion cost 10,000
Raw materials received on credit 400,000
Direct labor cost 300,000
Factory overhead applied 500,000
Ending RIP inventory per physical count, including P7,000 conversion cost 20,000
Ending finished goods inventory per physical count, including P4,000 conversion cost 6,000

1. What is the amount of conversion cost included cost of goods sold in June?
a. 802,000
b. 796,000
c. 794,000
d. 800,000
2. What is the amount of direct materials backflushed from RIP to finished goods?
a. 391,000
b. 404,000
c. 387,000
d. 395,000
3. What is the amount of direct materials backflushed from finished goods to cost of goods sold?
a. 395,000
b. 400,000
c. 393,000
d. 389,000
2|Page ADVANCED FINANCIAL ACCOUNTING AND REPORTING j s a b e l l a r

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