Journal entries are recorded when materials are

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Cornerstones of Cost Management
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Chapter 11 / Exercise 11.23
Cornerstones of Cost Management
Hansen/Mowen
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costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when units are sold.Conversion costs - May$105,625Direct materials purchased - May$262,575Units produced - May89,500 unitsUnits sold - May87,500 unitsSelling price$23 eachIf the two trigger points are completion of good finished units of product and sale of finished goods, which of the following entries would be used to record cost of finished unitscompleted under backflush costing? (Round intermediate calculations to the nearest cent and final calculations to the nearest dollar.)A) Finished Goods$359,625Inventory Control$256,375Conversion Costs Allocated$103,250B) Finished Goods$368,200Inventory: Raw Materials$262,575Conversion Costs Allocated$105,625C) Finished Goods$368,200Accounts Payable Control$262,575Conversion Costs Allocated$368,200D) Inventory Inventory Control$256,375Conversion Costs Allocated$103,250Finished Good$359,625Answer: CExplanation: Finished Goods = 89,500 × $4.11 = $368,200Accounts Payable Control = 89,500 × $2.93 = $262,575Conversion Costs Allocated = 89,500 × $1.18 = $105,625Diff: 3Objective: 7AACSB: Application of knowledge10) Under backflush costing approach where three trigger points are used (stage A, stage C, and stage D), the purchase of materials is:A) credited to the Materials and In-Process Inventory Control accountB) debited to the Materials and In-Process Inventory Control accountC) debited to the Materials Inventory Control accountD) ignored because the manufacturing process moves so quickly from acquisition of materials to the sale of the finished goodAnswer: BDiff: 2Objective: 7AACSB: Analytical thinking
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Cornerstones of Cost Management
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Chapter 11 / Exercise 11.23
Cornerstones of Cost Management
Hansen/Mowen
Expert Verified
11) Which of the following statements is true of a backflush costing system?A) All costs are tracked sequentially as products pass through each stage of production.B) When inventories are minimal, as in JIT production systems, backflush costing complicates costing systems.C) Usage of a backflush costing system does not satisfy the absorption costing rules of GAAPD) Backflush costing increases the ability of the accounting system to pinpoint the uses of resources at each step in the production process.Answer: CDiff: 2Objective: 7AACSB: Analytical thinking12) Which of the following statements best defines a trigger point in a sequential-tracking costing system?A) the inventory level at which a new purchase order is generatedB) the point at which the sum of annual relevant stockout and ordering costs is minimalC) the production level at which the costing system becomes incapable of tracking the production costsD) a stage in the production cycle at which journal entries are made in the accounting systemAnswer: DDiff: 2Objective: 7AACSB: Analytical thinking13) In a backflush-costing system, no record of work in process appears in the accounting records. Answer: TRUEDiff: 1Objective: 7AACSB: Analytical thinking14) Companies that utilize backflush costing typically prorate underallocated or overallocated conversion costs between work-in-process, finished goods, and cost of goods sold.Answer: FALSEExplanation: Companies that use backflush costing typically have low inventories so that prorating underallocated or overallocated conversion costs between work in process, finished goods, and cost of goods sold is seldom necessary.

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