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Unformatted text preview: E7-25 a. 1. Using a traditional costing system (as discussed in Chapter 5), all of the production costs would be changed to the Work-in-Process account; therefore, the total cost charged during the most recent month would be the cost of components of $905,000 plus the cost of conversion of $192,000, for a total of $1,097,000. 2. Using a traditional costing system Cost of Goods Sold would be charged with the total cost transferred to customers. Since there was no beginning or ending inventory, all of the cost of $1,097,000 charged to Work-in-Process during the month would have been transferred to Cost of Goods Sold.b. 1. Assuming a lean production system and backflush costing, all of the cost would have been charged directly to Cost of Goods Sold, thereby eliminating any debits to the Work-inProcess account. In fact, there would not be a Work-in-Process account under backflush costing. 2. All of the costs incurred during the month of $1,097,000 would be charged directly to the Cost of Goods Sold account as incurred.Note: If there was any ending inventory, under backflush costing, the costs associated with those units would be backed out of Cost of Goods Sold and charged to the appropriate inventory account. ...
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This note was uploaded on 05/08/2011 for the course 193431918X 711 taught by Professor Braham during the Spring '11 term at Missouri (Mizzou).
- Spring '11